Logistics-sector is a low margin and quite sticky business. Volume buyers (like recently IPO’d giants) are plenty. Then they fall short on delivery. Bajaj Electricals terminated their logistics contract with one such Logistics giant only after 2 years or so of business. Similarly Voltas.
Asset ownership OR light brings their own difficulties. It is advisable to not go by popular-names in this business – as effectiveness matters at the EoD. Delivery is a back end business and customers just need a company which does the job.
Essential metric to focus upon would be preTax ROCE, CFO into hand, management which is willing to forgo volume wrt margin. No point in running the company to ground for Brochure embellishments.
Investors have to be willing to be with the business rather than the stock.
| Subscribe To Our Free Newsletter |
