Private equity firms eager for DTDC stake

Four top private equity funds are eager to invest in DTDC, according to Subhasish Chakraborty, chairman and managing director of the express logistics firm.

Few in the industry have DTDC's record (set up in 1990) of continuous performance, he added and indicated that he was in no hurry to bring in fresh capital as the company has been cash positive for long and is consequently debt-free, he added.

DTDC is investing to grow but taking a careful call on what is critical to the business and what can be outsourced. Presently it is investing Rs 4 crore in its own data centre which will add to its e-enabling, vital to logistics operations.

Now, articles can be tracked through cell phones. It also claims to be the first Indian company to offer online booking. You can book and pay online and drop your article at their nearest collection point.

But DTDC is not looking at acquiring an aircraft to ferry its own cargo as some express companies are doing. "Why should we when a plane is leaving Bangalore every half an hour," asks Chakraborty.

DTDC is able to make every rupee it invests go that much further because of its franchisee model. "We are the largest networked courier company with 3,700 franchised offices, with 60 of our own hubs."

DTDC and its franchisees together account for Rs 268 crore turnover, though DTDC's own topline is Rs 125 crore (2004-05). Last year it grew 26 per cent, against an industry growth of 20 per cent. It earned a net profit of Rs 8.6 crore and pre-tax profit of Rs 14 crore.

On a standalone basis, DTDC is number two among Indian express logistics companies, after First Flight, but number one if you include the franchisees. The Indian express business is estimated at Rs 3,000 crore, of which 65 per cent in organised sector and 41 per cent accounted for by foreign firms. EMS Speedpost of the department of post has a 10 per cent market share.

DTDC is laying great store on its overseas expansion. In the US it is present in New York and New Jersey and has 12 franchisees. In the UK it is present in London and has six franchisees. It has operational partners in Hong Kong and Singapore and is present in all SAARC countries except Maldives.

Among its major clients is UPS, for which it handles all 'non-brown' location deliveries, that is at centres where UPS itself is not present. "With UPS we have a monthly billing of Rs 20 lakh," says Chakraborty.

Among its major customers, DTDC counts key players in IT like HP, Infosys and Wipro and major banks like Citibank, ICICI and SBI. In IT, the firm has just signed up a new key customer, Dell.

Despite earning a net margin of 7 per cent, healthy by industry standards, Chakraborty admits margins are under pressure. Attrition, in this people-oriented business, is a major challenge after the emergence of BPOs. The other challenge is the varying tax structures in the country.

Things like octroi and physical detention of carriers inhibit companies from sending merchandise across state borders, thus limiting the business opportunity for logistics companies.