<dhhead>MANAGEMENT DISCUSSION AND ANALYSIS</dhhead>
1. Overview of the Indian Air Cargo Industry:
As the Indian economy expands at a rapid pace, the air cargo industry
has risen to the occasion, propelling the nation’s growth trajectory to new heights.
With a perfect blend of robust infrastructure, cutting-edge technology, and strategic
partnerships, the industry is soaring toward unprecedented success. It delves into the
remarkable journey of Indian air cargo, showcasing its upward trajectory and the factors
driving its growth. With facts, figures, and insightful interviews, this story unravels
the untapped potential of Indian air cargo.
As per a report ‘India Air Cargo Outlook 2023’ by Trade and
Transport Group, towards the end of 2022, the air cargo industry traffic volumes globally
declined by about 8%, and the express traffic volumes declined by nearly 7-8%. On the
other hand, India saw an increase in international traffic volumes of about 10% and 8%
growth in the domestic market. Now, this budding air cargo industry has caught the eyes of
global logistics players and is bagging million-dollar investments from across the globe.
As reported in May 2022, Spicexpress - the cargo arm of Spicelet -
has won a USD 100m investment from UK-based SRAM & MRAM Group. On the other hand, air
freight capacity aggregator Teleport, also looking to take a slice of the promising Indian
cargo market, has voiced its intentions of taking a stake in Pradhaan Air Express in the
next couple of months with a strategic partnership. Looking at the market potential, CMA
CGM Air Cargo- the cargo airline division of the French-based CMA CGM shipping group, from
May, has also begun operating in India with an A330F aircraft.
Another example of the progress made by the Industry is the fact that
Airports like Delhi International Airport Ltd. has already handled transshipment cargo
from Bangladesh.
Becoming one of the most promising markets in the global scenario,
the potential of India’s air cargo industry reflects its role as a global economic
driver. India experienced a positive trend with an increase in international traffic
volumes of about 10%, suggesting that despite the global decline, India’s air cargo
industry is showing resilience and potential for growth.
Source:
https://www.logisticsinsider.in/indian-air-cargo-onwards-and-upwards/
2. Company’s Business Overview along with its Outlook:
During the year, the company has continued placing more emphasis on
the general cargo business and reducing its dependence on perishable cargo. The ratio of
general cargo during the FY was more than 50% which is almost at par as compared to the
previous FY.
For more aggressive growth, the company would require funding from
various sources. The Company may opt either for organic or inorganic growth. With the
overseas establishment in UAE, USA & European countries, the management would consider
availing funding in foreign currency by evaluating all the possible options. This would
result in saving in interest costs as foreign currency loans would be available at quite a
cheap rate as compared to domestic funding.
The Company aims at continuous up-gradation of its logistic expertise
while being resilient in providing responsible and reliable logistics solutions to its
clients. During the year, the Company onboarded various Customers like Cipla, Baramati
Agro-Export, Oriental Rubber Industries Ltd, Roquette India Private Limited, Samsung, BGR
Energy Systems Ltd, Alok Industries Limited, Gujarat Narmada Valley Fertilizers &
Chemical Limited, Piramal Pharma Limited, Aurobindo Pharma Limited, Neilmed
Pharmaceuticals Inc and many more.
In June 2023, India Ratings & Research Ratings rated the outlook
on the various instruments of the Company and assigned an IND BBB-/Negative (Reaffirmed)
on the Long Term Bank Facilities and IND A3 on the Short Term Bank Facilities.
Outlook: A strong focus on creating an asset-light company with a
focus on digitalization.
The roadmap of the Company is to focus on agile sustainability in
supply chain management while focusing on becoming a global integrated leader.
Our Executive Leadership Team comprises of Mr. Arvind Talan, Chief
Financial Officer, Mr. Joy John, Director-Air & Sea Freight, and Mr. Ashish Nagpurkar,
Chief Human Resource Officer. A promising future and revenue generation will be from the
contribution of their services.
The recent appointment of Mr. Sameer Mistry into their executive
leadership team as Vice President of Technology and Business Excellence would lead to
technological innovations, enhancing the digital platform for customers, developing
strategy to complement the launch of new business products, and deliver critical solutions
for the organization’s operational teams. Mr. Sameer Mistry is experienced in driving
and implementing Transformation programs, Standardisation initiatives, Digitisation
Projects, Automation using modern technologies, and designing Customer-centric Solutions.
His hiring represents Jet Freights’ relentless commitment to technology excellence
and innovation.
As regards the Union Budget of 2023, expectations center around the
implementation of plans outlined as part of the National Logistics Policy (NLP) that PM
Modi launched in September 2022. It is aimed at enhancing economic growth, increasing
employment, and improving the competitiveness of domestic products in local markets and
abroad, the NLP will establish a single-window e-logistics market and promote the seamless
movement of goods across the country.
3. Key Risks Identified:
Our Company, like any other enterprise, is exposed to business risk
which can be internal risks as well as external risks. The normal risks of fluctuation,
drop in freight rates, foreign exchange fluctuating interest rates, Government policies,
competitive forces, changing technology, and obsolescence remain.
Airlines transport over 52 million metric tons of goods a year, which
needs to be managed and transported by the Freight Forwarders. Their Job is a difficult
one which further intensifies with unprecedented occurrences. Over the last couple of
years, overwhelming number of recurring disruptions has not only made the industry realize
the importance of freight forwarders but at the same point forced forwarders to broaden
their service offerings to remain competitive, digitize and deliver a connected customer
experience.
The last couple of years brought forward the importance of air cargo
as medicines, protective kits, and vaccines had to be rushed across the world to fight the
COVID-19 pandemic. At the same time, the reduction in ocean capacity and the challenges
around moving any kind of cargo timely and without locking inventory meant an increasing
reliance on the air cargo mode.
Being an India-based logistics company, working capital is the
biggest requirement. Also, maintaining a good relationship with the airlines and shipping
industry leaders and timely customer payments are very important parts of the business and
sometimes come with their own set of challenges. Increased manpower cost affects the
working capital cycle of the Company & employee attrition remains high. Nevertheless,
during the year, the Company has improved it by 8% from the previous year. It also results
in a decline in the EBITDA margins of our Company.
4. Risk Mitigation Strategy:
The COVID-19 pandemic has taught us that companies need to implement
stronger risk mitigation strategies to prepare for any future disruptions. Skilled
Manpower is very crucial for the growth of the company. Hence their identification and
recruitment to handle various cargo are pre-requite for the success of the business. In
that direction, the company has highly skilled personnel in the HR department in place to
minimize the attrition rate and the existing manpower is provided with adequate training
and grooming by conducting training programs and sponsoring them for various trade-related
programs.
The pandemic had made the industry adapt to digitization, which has
accelerated the possibility of integration, and this has benefited all end-users.
The Company is focusing on the following strategies in terms of
technology:
To implement robust security measures, employ network security
measures with firewalls, intrusion detection, prevention systems, and network segmentation
to secure the network against external threats.
• To bring new systems to mitigate process gaps and operation
leakages.
• To train employees on cybersecurity awareness, phishing
prevention, safe browsing habits, and the proper handling of sensitive data.
• To implement a robust business continuity plan for both IT
infrastructure and operations continuity.
The Company raised funds amounting to Rs. 37.70 Crores by further
issue and allotment of equity shares on rights basis from its existing shareholders which
were listed and admitted to dealings on both the Stock Exchanges wef February 14, 2023.
The Issue was oversubscribed by 1.41 times.
An increase in Exports is now set to transform the Indian economy.
Several airlines that had reduced their workforce during the Covid disruption now are
trying to get back to full swing to accelerate the logistics business.
The Company has an elongated working capital cycle as it allows its
customers a required business credit period, even though it has a payable period of 30
days from most of the airlines, for gaining a competitive advantage. The Company is opting
for customers with Invoice Discounting. The company expects the receivable period to
shorten further over the medium term with the planned increase in the revenue from the
ocean freight segment, where the vendors are allowed a shorter credit period than air
freight vendors. By implementing the following strategies, the company can reduce the
impact of potential risks and ensure business continuity.
• Monitoring suppliers’ risks, such as political,
geographic, and economic risks, and taking appropriate measures to mitigate them.
Prioritize cargo by expanding itself into an all-cargo airline.
• Identify alternative routes and carriers and their impacts on
supply chains.
• Consider purchasing alternate insurance to protect the cargo
from loss or damage during transportation.
5. Opportunities:
Over the years, as India’s logistics arena has transformed, this
organization has also evolved by adapting newer technologies and by making itself into
more of a platform-driven/aggregator-driven business.
Jet Freight, as a multimodal logistics service provider, has an
existing presence in more than 14 cities across the country. As the Company was
experiencing high demand for its services, we announced the employment generation of 100
skilled logistics professionals as a strategic plan for expanding the business vertical.
The jobs offered were in operations, sales, and pricing profiles. This was an excellent
opportunity for those looking for a logistics career. Jet Freight is also expanding its
wings to new regions in the country like Lucknow, Pune and Jaipur. With the new team
coming in, Jet Freight plans to adopt the best employee policy, flexible development
opportunities, workplace diversity, and brand equity, and focus will be at the forefront
of hiring and retaining strategy. The new team will be responsible for an influx in demand
for logistics solutions and the Company’s best offerings in their respective region.
Also, with the help of our new Executive Leadership Team, Jet Freight
will reach greater heights and is keen to leverage its leadership skills in enhancing our
sales and operations. Their competitive selling strategies to improve brand and service
awareness will help us enhance our existing client’s relationships and increase our
business in the country. To build and develop long-term business strategies and help
bundle our services to reach untapped market clusters, thereby strengthening our revenues
and bringing in more business opportunities. Jet Freight is focusing on increasing its
market share in the country and is seeking to gain a stronger clientele.
The Company is exploring opportunities for an increase in the ocean
freight business, Warehousing near Mumbai Port, Import Clearance at Sahar Air, Nava Sheva,
and from Chennai. The Company is also in the midst of onboarding various renowned
Corporate Customers.
Contract Logistics:
Scalability, flexibility, and reliability are the key characteristics
of contract logistics solutions delivered by a team of experts who not only understand the
complexities of Indian and global supply chains but also have a sound knowledge of various
business sectors and their unique needs.
The company has also planned to further diversify its business
operations in warehousing services which are likely to be commissioned FY 2025 onwards.
The said expansion project is being funded through the proceeds of the rights issue
received from shareholders of the Company.
6. Segment-wise Performance:
The Company operates in a single segment of freight forwarding and
therefore, the segment-wise reporting is not applicable to the Company.
7. Internal Control Systems and their adequacy:
The Board has laid down Internal Financial Controls and believes that
the same are commensurate with the nature and size of its business. Internal control
systems are embedded in all processes across all functions within the Company. These
systems are regularly reviewed and wherever necessary, they are modified or re-designed to
ensure better efficiency, effectiveness, and improved controls.
All processes and systems are subject to Quarterly Internal Audit
through an annual internal audit plan approved by the Audit Committee. These are further
supported by Internal Auditors and Statutory Auditors, who validate that financial
reporting is true and fair, and that these controls are designed and operating
effectively.
Based on the framework of Internal Financial Controls, and work
performed by the Internal Auditors and Statutory Auditors, the Company is able to prevent
& detect frauds/errors and to ensure the accuracy, completeness of accounting records,
and timely preparation of reliable financial disclosures.
8. Discussion on financial performance with respect to operational
performance:
The company’s PBIT was impacted by the increase in personnel
costs, resulting from the hiring of a talented pool of professionals from various renowned
companies and putting a focused approach towards technology for the future growth of the
Company. While there was a reduction in the freight rates, we were able to serve a good
pool of corporate clients during the reported specifically period and got an increase in
the business, ocean operations. The increase in personnel costs has impacted our PBIT, but
we are confident in our ability to continue delivering exceptional services to our
customers with excellent results to all stakeholders.
Our keen focus would also be on, cost optimization initiatives and
technology driven processes in the coming future. The number of shareholders of the
Company has skyrocketed over a period showcasing the confidence of the stakeholders on the
vision, services, and operations of the Company. Needless to say, the recently concluded
Rights Issue of the Company closed at a remarkable subscription of 1.4 times of the Issue
Size.
Jet Freight remains committed to providing its customers with the
highest quality services and shall continue to serve the customers with the help of talent
savvy manpower to ensure that the Company remains at the forefront of the industry.
At the same time, with the increase in the crude oil price, a
hindrance to airlines’ capacity, and critical geopolitical circumstances, freight
rates have also impacted. The company ended the year with 21,607 tonnages of shipment.
9. Material developments in Human Resources/Industrial Relations
front, including the number of people employed:
A total of 237 employees were employed as of March 31, 2023.
The induction of Mr. Ashish Nagpurkar as the Chief Human Resource
Officer (CHRO) of the Company (not as a Key Managerial Personnel in accordance with
Section 203 of the Companies Act, 2013) has led to the expansion of the Company’s
talent pool enabling us to further enhance its ability to meet the needs of its customers
during current year and for future ready. He is responsible for complementing global
people culture and workplace strategies at Jet Freight.
To uphold the promise of the Company’s mission statement, in
April 2022, Jet Freight had a grand event to launch its Core Values encompassing:
•
Customer First
•
Rise to Innovate
•
Collaboration
•
Growth mindset
•
Agility
•
Ownership
Apart from the announcement of "Mission Excel" as a
high-growth business transformation initiative, during the year, Mr. Nagpurkar introduced
two new policies as part of continued efforts. One is the dress code company policy which
outlines how the employees are expected to dress at work. Employee’s appearance
matters when representing the company in front of clients, visitors or other parties. An
employee’s appearance can create a positive or negative impression that reflects on
our company and culture. The other is the "Time & Attendance Policy" which
states that the company is committed to help employees face the demands of juggling work,
family, medical circumstances, and personal obligations by offering a number of possible
flexible work arrangements. These arrangements provide employees with increased
flexibility with their work schedule and maintain a work-life balance while allowing the
Company to maintain a progressive and productive work environment.
10. Details of (i.e change of 25% or more as compared to the
immediately previous financial year) in key financial ratios, along with detailed
explanations therefore, including:
Particular
Parameters
31st Mar 2023
31st Mar 2022
Change in %
Tonnage
Tons
21,607
22,297
-3.10%
Revenue
Crores
418
458
-8.72%
Gross Profit (%)
GP/Revenue
7.74%
6.58%
7.46%
Debtors’ days
Debtors/ Sales per day
39.31
33.46
17.38%
Interest Coverage Ratio
EBITDA/ Interest Expenses
1.80
2.95
-38.96%
PBT %
Profit Before Tax/ Revenue
0.20%
0.98%
-79.16%
Current Ratio
Current Assets/ Current Liability
0.82
0.67
12.31%
Return on Net Worth (%)
Net Income/ Share Capital
0.26%
24.30%
-98.92%
Debt/ Equity Ratio
Net Debt/Equity
0.80
1.69
-52.52%
Operating Profit Margin %
EBITDA/ Revenue
1.97%
2.39%
-17.54%
Earnings per share (Rs.)
Net profit/ No. of equity shares
0.01
2.43
-99.46%
TEUs
TEUs
6350
1639
287%
Decrease in Interest Coverage Ratio, PBT, Return on Net Worth, Debt/
Equity Ratio and Earnings per share: It is mainly due to a reduction in operating profit
and in the freight rates after the Covid period although the Company continues to maintain
the tonnages as compared to the previous financial year. Another major reason for this
significant decrease is the extensive acquisition of a pool of highly experienced and
qualified professionals from various renowned companies and investment in technology
advancements for future growth.
For and on behalf of the Board of Directors
For Jet Freight Logistics Limited
Richard Theknath Dax Theknath Chairman & Managing Director
Executive Director
Place: Mumbai
Dated: 07.07.2023
+91-9892691696
