FMCG, e-Commerce businesses are expected to perform well in 2021: Rampraveen Swaminathan, Mahindra Logistics

Rampraveen Swaminathan, Managing Director & Chief Executive Officer, Mahindra Logistics, talks about expectations with COVID vaccine distribution opportunity, and outlook for the New Year, 2021, during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts: 

Q: What is your view on COVID vaccine distribution opportunity and what incremental business and revenue are expected from it? What are your plans on that front, including the kind of expansion that has been made?

A: COVID is a very big opportunity for us. In COVID there are three-four parts of the opportunity

It is around the cross-border or Exim logistics, we are termed as fleet forwarding, which is things moving into India and because India will be a big production centre, export from India as well. So, that is one big opportunity for us given our fleet forwarding business and we are focusing a lot on it.

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 It is around distribution or primary distribution in India from plants down to the local centres, where the vaccination will be done.

The last mile distribution, which depends on how government policy emerges. In the first phase, I think, the government may use the existing infrastructure but over a period that will also emerge as an opportunity.

Right now, we are working on all three opportunities. We are very upbeat about the first two in which I have said about the across-border or Exim logistics, which we think will be a long-term opportunity, not for one-two years but they will be a long term opportunity. The second one is about the distribution of the vaccine. In the first year alone, there would be a need to vaccinate at least 30 crores and then it will be a multi-year program after that. It has to be seen that whether it is a single dose vaccine or a multiple doses vaccine. So, because of that, there will be a fair amount of volume there. From the Mahindra Logistics side, we are working both on the international Exim opportunity with several pharma companies and find the solution that we can do with them.

At the same time, we are also working with them on distribution, both warehousing and transporting opportunities around the distribution of the vaccine. In the third case, I have said that the last mile policy is still evolving and we have to see how it evolves over a while but the opportunity remains very interesting and it is just not an economic opportunity but obviously, it is a very important thing for the country as well. 

Q: Can you please quantify about the kind of preparation that has been made and what kind of expansion will be made in terms of warehousing and distribution as well as the additional CapEx that will be lined up for the purpose? Do you have the internal capacity or you will have to outsource to third party vendors? 

A: Our business model is asset-light, so, we actually and essentially work on building capacity along with the partners. So, we are looking at adding capacity along with our partners in two, three areas,

Exim side: We are working with partners most of them are air carriers in terms of blocking capacities with them in light of opportunity. This is one thing that we have already done and we fell in detailed negotiations around that, though we have not finally made any official communication. 

Warehousing side: We are building GDP JMP capable warehousing infrastructure in four-five key locations around India, where we think, which will be nodal points from a distribution infrastructure perspective. 
Large fleet of refrigerated trucks: We are working with our partners to add a very large fleet of refrigerated trucks, which would be used for the distribution of the vaccines.

Right now, we are looking at very significant expansion there, though; we are not in a point where we can say the exact numbers that we are going to target. It will become little-bit clear in the next six to eight weeks in terms of what we will decide to add but a lot of planning is going on right now and we are looking at the opportunity very seriously in terms of capacity addition. 

Q: What is your outlook for the next year 2021 in terms of the top line, bottom line and margins and the new business?

A: Even without COVID, we feel that there is a strong growth opportunity and if you have had a look on our last quarter results then our supply fleet business grew very strongly, it grew over 7% overall. When it comes to our non-auto business and our warehousing and value-added business it grew by 15-17%. So, that was without any COVID vaccine impact, as you called out and that momentum is something that we feel we can actually maintain from the growth perspective. If you look forward to FY 2021-22 then we think there are three big positives

Auto sector business: There should be a correction in the auto sector as compared to FY 2020-21, obviously with the festive season coming, we are seeing a lot of positives and improvement in demand and we expect that at least from the passenger vehicle side and the utility vehicle side, we expect that a correction will happen and stabilize next year. It is very important for us because we have a very large auto business.

Consumption-driven business: If you have a look at non-auto, I think, our consumption-driven business in which we have consumption in FMCG, pharma, durables, e-Commerce and all of those will actually come back to a strong growth position. So even without COVID, we expect that it is momentum is something that we can maintain, especially in e-Commerce, durables, FMCG, Pharma, although, there will be some shift because there was some pent-up demand was there, which will not be there going forward but underline demand should also come back.

So, we expect that both of those are very positive and COVID is an added opportunity.