Supplychainlog had recently reported Abhik Mitra led SPOTON Logistics eyeing for an acquisition of a middle-scale 3PL firm before the end of the current fiscal (https://www.supplychainlog.com/2019/09/22/spoton-acquire-mid-scale-3pl-firm-fy-2019-end/) which will broaden the operational profile of the company known primarily known in the market as express operator. In a recent exclusive conversation with Ritwik Sinha, the MD of SPOTON also shared the details of the near run growth plans and the possible impact of the present slowdown spell on company’s performance. Edited excerpts…
Business environment seems to be turning from bad to worse with the growth projections for the near to medium run getting slashed by several agencies. How has it begun impacting players in the logistics industry, how would you explain the prevailing sentiment in the market place ?
There is no denying the fact that it has become tough in the last four-five months. And in the last couple of months, it has become tougher with the extreme decline in the automobile industry. I think, by now we realize that this slowdown would not be a 2-3 months affair but it may well take 6-9 months for liquidity to come back in the system and for business confidence to be restored. People were initially talking about auto sector but we have seen the percentage growth in the stocks of segments like apparel coming down. So its across the board. Salaried class is postponing the purchase and consumer behavior has changed.
So have your clients started re-negotiating the services rate with you?
Not really. We are in the express business which has 4-5 major names. We have been very cost competitive since we started.
Are you in a position this time to expect any serious surge during the festive season as it normally happens?
There is a surge but in percentage growth terms it is lower than the normal times. If we notice any improvement in volume in the last ten days of September, it would mean there is some hope.
So does it mean, 2019-20 will be a lost fiscal? And established players would play more by the status quoism rule?
We are managing for cost and efficiency looking at productivity across every function. But we were doing it earlier also. It is not that we will be sacking people or hold on to our expansion plans. Such spells keep on happening and no company seriously changes its strategy if there is a slow period of 6-8 months. So we continue to invest whether it is in network expansion or in expanding sales force. We want to grow our retail SME vertical and we are recruiting sales professional for this vertical. But in such situations, you have to bring in a certain degree of management prudence.
How would you explain your stronghold verticals and immediate growth plans? Will you be more cautious?
30 percent is industrial. Then there is lifestyle and apparel, auto, pharma and electronics. Amidst these, we have seen slowdown in auto and apparel.
We are cautious but we continue to invest in our network and infrastructure. We have opened a big warehouse unit in Pune and on 1st November, we are shifting to a bigger unit in Bhiwandi. We have planned to take a much bigger hub in KMPL which will happen in next 6-8 months. We are expanding our network in Bihar, Jharkhand, UP and Uttrakhand. So for us at a fundamental level, its business as usual. We have become cautious to the extent that if we had earlier planned to open 10 services centers, we may now opt to do seven. In the near run, we will be adding about 20 more sales professionals to our present base of 130. They would mostly be in the areas where we want to grow our business and where we find ourselves with small presence.
In terms of topline and critical financial numbers, where have you reached as a company? And considering the tough economic environment, do you expect any moderation in growth for your company this fiscal?
Last year, we had a topline base of around Rs 600 crore with Rs 44 crore as EBIDTA margin. This year we expect to touch Rs 700 crore with EBIDTA upwards of Rs 55 crore. So basically its going to be a 16 percent growth in revenue this year. In next two-three years, we expect to reach close to or touch Rs 1,000 crore. We are smaller than our competitors and we are growing at a brisk pace.