Expect ULIP platform will be operational in next 6 months: Pirojshaw Sarkari

The completion of the Eastern and Western Dedicated Freight Corridors (DFCs) have been delayed five times. Last year the DFCs faced delays due to pandemic-induced challenges and land acquisition delays. The Dedicated Freight Corridor Corporation of India (DFCC) said that the Eastern DFC will be completed in 2023 and the Western DFC will be completed in 2024.

Gati, an Allcargo company, has been on a turnaround spree for the last 12 months. The company reported encouraging numbers in the second quarter of FY23. However, in the third quarter, its net sales saw a slight decline compared to a year earlier.

Gati's net sales stood at Rs 63.00 crore in December 2022 down 2.99 percent from Rs 64.94 crore in December 2021.

Edited excerpts from the interview:

Q. The government in September last year launched the National Logistics Policy. Over the last few months, they've started beta testing the ULIP platform which was proposed under the policy. Have you been in touch with the government? Have you been using some of the datasets that are available on the ULIP platform?

A. Yes, we have been in touch and attended many of these discussions that have gone on between the government and the private sector.

There are also certain synergies that have already crept in. For example, access to government portals, which is now being given to the private sector through API integration is really helping us as an organisation.

To give you an example, as you know, we have access to the GST (goods and services tax) portal. If we want to ratify a customer's GST number, it can now be done online through our system, even for our vendors. On the Vaahan portal, which is also integrated now, we can check whether the vehicle registration and the insurance are up to date. And many more such government portals are getting integrated.

The ULIP platform is still in the trial phase, but instead of ULIP coming up as one unified platform, parts of ULIP are being made available to us as a logistics player, which is helping us a lot in compliance and ease of being able to do business.

I think the ULIP platform should be available for use in the next six to 12 months.

Q. The government is betting big on the adoption of railways for the movement of cargo in the country to reduce logistical costs. What are the biggest bottlenecks that the government currently faces in making this a reality?

A. In the endeavour to reduce cost, I think rail plays a very, very important role. If I were to move any cargo beyond 1,500 km by rail, it would be at least 15 percent cheaper than moving it by truck.

But I think the stage where logistics companies will be reliably able to use the Indian Railways to transport goods is still quite a way off because I still don't see freight corridors coming up so soon in the near future.

The problem today is that there is no certainty in goods trains, right? So I cannot use them for express cargo. But once the freight corridor comes up, which is for scheduled trains that move only freight, that's when we'll be able to use it.

I would say that the dedicated freight corridors would open up phase-wise and I would see phase 1 opening up maybe three to five years down the line. In phase one, 40 percent of the total length of the dedicated freight corridors will be operational.

Q. The government is working on new warehousing standards. Once these are introduced, what is the quantum of investment that you expect will come in from the private sector?

A. I have no idea about the quantum of investment. But if you follow history, year after year, the investment in the warehousing sector has only increased and I would say for the next at least five years, you will see this increase going on.

From our own perspective, we are handling around 5 million square feet of the warehouse at present and we are looking at going to 15 million square feet in the next three years.

Q. How much money have you set aside for your planned expansion from 5 million square feet to 15 million square feet?

A. We are an asset-light company. We don't own our warehouses. We take long lease positions on them. But of course, every time we open a new warehouse, on an average of 100,000 square feet, we spend around Rs 3-5 crore on material handling equipment like the racking systems.

Q. After disappointing results in Q3, how do you expect your operations, especially your top line, to grow in the next few quarters?

A. Basically, we look at growing our top line at least 1.5 times the market growth. We expect the industry to grow at about 10-11 percent and, therefore, we should grow anywhere between 15 and 18 percent.

Q. What are Gati's bottom line and top line targets for next year? And what are your capital expenditure plans for the next couple of years?

A. I have already put out in the market that by 2026, we will be a Rs 3,000-crore organisation with an EBITDA (earnings before interest, taxes, depreciation and amortisation) of 10-12 percent.

No real big capex plans, like I said, we are an asset-light organisation. We basically need two things. One is that we need our infrastructure to be in place, which I expect by the end of next year it would be.

We also are stabilising our operations which I believe we have fully completed now. We are operating at matrixes that are equivalent to the best in the industry. So it is only a matter of acquiring more market share from our customers.

Q. What are the operational benefits that you're experiencing after your acquisition by Allcargo? What synergies have come into play?

A. Allcargo is not shying away from making any investments in Gati.

We have identified a lot of infrastructure projects that needed to be recreated or revamped, and we are on track of developing that infrastructure in Gati.

We have also invested in digital projects. We are also looking at revamping our entire backbone digitisation. The good thing about the organisation is that it's willing to invest for the future, both in technology infrastructure and people, which forms the basis of growth for our company.

In terms of operational benefits, at a group level, number one is we have instituted a cross-sell programme, which means that we offer Gati customers Allcargo services and vice versa.

That gives more penetration and stickiness with the same customer. That's on the customer front.

Allcargo also has a company that builds out industrial parks, which helps Gati in building out its infrastructure. Therefore, for us at Gati, we don't have to worry about the infrastructure build-out which other logistics companies have to do on their own.

The third important point is that we can take advantage of the large customer base Allcargo has both in India and internationally.

Q. A number of international players are looking to expand in the logistics industry in India, the likes of Amazon have announced that they will set up warehouses in India, DHL has come out with similar plans. Do you think your model of not owning your own warehouses will start affecting your market share?

A. On the contrary, see, the investment and build-out of warehouses is always done by separate companies. So, you have the Blackstones and the Embassy Parks of the world who do the build-outs. We kind of take anchor possessions in these warehouses, wherever it suits us. And of course, we take possessions that span five to 10 years.

It gives us a lot more flexibility. And it also allows us to be able to expand within the park as and when we require.

Q. Are you also working with any airline or any international players as a collaborator to handle their warehousing facilities in the country?

A. Not yet. While we do a lot of warehousing for our joint venture partner, we haven't yet started any warehousing for airlines. But we do collaborate with domestic airlines for our domestic air express service. In fact, just the day before yesterday, we were awarded by Vistara as one of their premier partners for cargo movement.

Q. Going forward, as airports also look to expand their cargo handling facilities, are there any specific contracts that you're targeting?

A. As a group, the answer to your question is yes. As Gati, the answer is no. So the group definitely is exploring possibilities of handling cargo at various new airports that are opening up in the country.