Have you ever wondered how a trader in Hyderabad is able to sell his goods in New Delhi in a matter of days? That is possible only through a good logistics system.
Businesses in any country can grow only when the logistics & transportation system is strong. A strong logistics system facilitates the growth of a variety of enterprises by enabling them to deliver their goods directly to customers. This article will tell you all you need to know about the logistics industry, the advantages & disadvantages of investing in this sector, and the top logistics stocks in India.
Also read: Navigating the future: The rise of warehousing and logistics in India
Understanding the logistics sector
Manufacturing gets value added when finished goods reach the final consumers, which is the domain of logistics. The manufacturing industry in India is claimed to reach a figure of a trillion dollars by the year 2025-26. There are good prospects for India’s manufacturing sector 2024 October Purchasing Manager’s Index PMI was recorded at 57.5, this index when above 50 shows that manufacturing activity is expanding. Manufacturing occupies 17% of India’s GDP and in 2023, employed 35.65 million people in the country. The logistics sector is going to be the biggest beneficiary of the rise of manufacturing.
The Indian logistics industry is one of the largest in the global economy with a diverse scope of transport, warehousing, and supply chain management. The development of logistics processes is improved and gets cheaper by using advanced technologies such as supply chain automation. This expansion of logistics has been one of the factors that have contributed to the rapid growth of the e-commerce sector in India is projected to be able to reach $325 billion by 2030. Retail giants like Amazon and Flipkart use institutional frameworks that enable the flow of goods between sellers and buyers across the entire country.
Also read: Overview of the e-commerce industry in India
Key reasons investors prefer the logistics space
- Economic development boosts the supply chain industry: When a country’s GDP rises, people spend more and more on goods and services. This spending boost puts a good push on the logistics industry. The demand for transport, warehousing, and supply chain services rises.
- Businesses invest in supply chains to reduce costs: Businesses always try to cut their costs to maintain their competitive advantage. That’s why they consistently keep investing in better supply chains, storage, and distribution networks or seek the services of a logistics company.
- Technology adoption: Technology is being developed in all sectors of the economy. The logistics sector is one of those that will benefit from these advancements. Supply networks are becoming better and more cost-effective thanks to new technologies like artificial intelligence (AI) in supply chain management. And because of these developments, logistics companies attract big customers.
- Government support: The government understands the importance of this sector to support overall economic growth is the reason they have introduced many programs like dedicated freight corridors, which are large-capacity, fast railroads to improve the transportation of commodities and goods.
Other programs like the National Logistics Policy (NPL) introduced in 2022, aim to boost the logistics sector by making it more seamless and integrated.
Key considerations before investing in logistics space:
- Poor transportation infrastructure: Even though the construction of highways is moving forward quite well, City Roads still aren’t great; problems such as narrow roads, heavy traffic, and so on are some of the factors that waste time and lead to losses in the logistics industry.
Also read: Road infrastructure in India: A snapshot of its current status and future
- Scarcity of skilled labour: The logistics process embeds a number of skilled people like truck drivers, forklift operators, crane operators, and so forth; this area suffers a serious shortage of skilled people. This contributes to an adverse productivity impact.
- Expensive technology: When technologies like AI, data analytics, etc. are implemented at full scale, they increase productivity. Building and installing these capabilities is a very expensive and time-consuming task. It often takes years for a company to develop these technologies.
- Fragmented Industry and foreign competition: A sizable percentage of the dispersed Indian logistics sector is operated by unorganised firms. This causes problems when integrating supply chains for large-scale operations. Competition by foreign players, who have better technology, more efficient systems, better personnel training programs, etc often pose a threat to domestic players.
Top 5 logistics stocks in India:
Here are the best logistics sector stocks in India in terms of revenues and net profit for FY24 and market capitalisation as of 19th November 2024.
- Container Corporation of India: CONCOR has three main businesses: terminal operator, carrier, and warehousing. As a carrier, the company uses railways to provide logistics facilities using containers to move cargo. As a terminal operator, the company operates 64 terminals that provide warehousing, container parking, etc. services.
In FY24, CONCOR moved 47,19,984 twenty-foot containers.
- Delhivery: A logistics company that provides complete services from transportation and warehousing to supply chain software service. Delhivery has an asset-light business model where it does not directly own warehouses or fleets. Instead, it partners with various fleet owners and franchisees.
In FY24, the company made 58.7% of its revenue from parcel service.
- Blue Dart Express: Blue Dart Express is part of the DHL group. This company provides logistics services in over 55,400 locations in India and specialises in time-sensitive shipments. This company provides other services like customs clearance, freight forwarding, etc.
This company owns eight cargo planes and over 33k vehicles as of June 2024.
- Transport Corporation of India: TCI provides freight transport through seaways. This company owns six ships and more than 10k trucks. With a direct presence in 5 countries, this company has 14mn+ sq. feet of warehousing space. In FY24, this company earned 50% of its revenue from freight services. In H1FY25, the company moved 73,603 TEU containers.
- TVS supply chains solutions Ltd: TVS Supply Chain Solutions offers supply chain supervision to international organisations, governments, and big businesses. In the financial year 2023 – 24, this company earned 57% of its revenue from integrated supply chain solutions with only 29% revenue coming from India. This company has been around for 100+ years and employs more than 18k people.
Financial performance for companies mentioned above in FY24:
| Fundamental metrics (In ₹ Cr) | CONCOR | Delhivery | Blue Dart Express | TCI | TVS supply |
| Market Capitalisation | 47,875 | 25,544 | 17,507 | 8,746 | 8,038 |
| Sales FY24 | 8,653 | 8,142 | 5,268 | 4,024 | 9,200 |
| Sales (H1FY25) | 4,391 | 4,362 | 2,791 | 2,166 | 5,052 |
| Expenses | 6,695 | 8,015 | 4,415 | 3,613 | 8,502 |
| Profit before tax | 1,669 | -224 | 393 | 388 | -69 |
| Net profit FY24 | 1,262 | -249 | 301 | 354 | -90 |
| Net profit (H1FY25) | 625 | 64 | 116 | 199 | 18 |
| RoE (%) | 10.9% | -2.94% | 22.7% | 19% | -7.39% |
| 1-year return (as on November 25, 2024) | 5.31% | -9.72% | 8.18% | 24.62% | -15% |
Bottomline
Looking for top logistic stocks can be a great diversifier to your portfolio. These stocks are all set to shine from the upcoming government policies and investments.
This sector can sometimes face difficulties from international and geopolitical issues that can disrupt its activities. As evident in FY24 results for some companies, these got affected by the Red sea shipping crisis where terrorists attacked cargo ships near the Red Sea. Before adding these stocks to your portfolio make sure you thoroughly research them and always remember past results never guarantee future returns.
FAQs
1: Which is the biggest logistics company in India?
The logistics sector in India is led by Concor, which has a market worth of 47,875 Crores as of November 19, 2024. In the previous financial year, it made 8,653 crores in sales and 1,262 crores in net income. This company primarily employs locomotives to transport goods throughout India
2: Which is the biggest logistics company in the world?
United Parcel Service (UPS) is the largest logistics institution throughout the globe. The market value of this American company as of 19 November 2024 stood at 113.67 billion dollars. In FY24 Q3, this corporation generated 22.2 billion dollars of revenue and 1.54 billion dollars of net profit. As of July 2024, UPS Pent delta owns 296 aircraft, of which 210 are on lease.
3: Which are the top 5 logistics stocks in India?
The first market value contraction among the successful five logistics companies in India goes to Concor, delhivery, Blue Dart Express, Transport Corporation of India, and TVS supply chain solutions. These firms earned revenue in the brevity of 18,762 crores for the period between March to September of 2024.
4: Which large-cap logistics industry share paid the highest dividend?
Concor is the largest logistics company and whose dividend is the highest. For the financial year 2024-25, Conor paid a dividend of ₹3.25/share. This gave a dividend yield of 1.46% as of Q2FY25.
5: Which company in logistic sector is the best bet in terms of long term investment?
Concor can be viewed as a long-term investment as this company has been making profits for the last ten years as it plays a very crucial part in the Indian economy by moving goods across the nation using trains. The logistics sector will grow with the economic growth of India. But past history does ensure future returns.
