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Indian Economic Overview

Amidst uncertain global economic outlook, Indian economy exhibited signs of resilience. Strong economic growth helped India overcome the UK to become the fifth-largest economy after it recovered from COVID-19 pandemic shock. Indias real GDP recorded a growth of 7.2 percent in FY 2022-23, stronger than RBIs expectation of 7 percent. Currently available forecasts of Indias real GDP growth for 2023-24, including those of the RBI, broadly settle between 6.0-6.5 percent, this contrasts with Global GDP growth projection of 3 percent. India has emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years. The Government announced Foreign Trade Policy (FTP) 2023 in March. It aims at reducing transaction costs and encourage ease of doing business through process re-engineering and automation.

Overall aggregate demand conditions remain supportive of growth driven by improving household consumption and investment activity. Governments thrust on the infrastructure and revival of corporate investments in select sectors augur well for the economy. Investment activity in India is exhibiting buoyancy on the back of strong composite Purchasing Managers Indices (PMI) readings. Merchandise exports have risen by 6 percent in FY 2022-23 to an all-time high of USD 447.5 billion and services exports remain strong. Overall, merchandise imports also reached an all-time high of USD 714.2 billion in FY2022-23, increasing by 16.5 percent y-o-y. E-way bill volumes and toll collections remained strong, reaching new highs in March 2023. RBIs monetary policy measures have resulted in headline CPI inflation declining from 7.8 percent in April 2022 to 5.7 percent in March 2023 with further easing expected during the year.


The Union Budget 2023-24 aimed at strengthening Indias economic status in the 75th year of Indias independence. Seven priorities adopted in the budget included inclusive development, reaching the last mile, infrastructure & investment, unleashing the potential, green growth, youth power and financial sector. RBI expects Indias real GDP to grow at 6.5 percent during the financial year 2023-24, on the back of resilient economic activity and evenly balanced risks. Globally, geopolitical issues, high inflation, and tight monetary policy conditions will continue to have a negative impact on the growth. Despite global challenges, India will continue to grow and remain resilient against external shocks. India is set to benefit from governments thrust on infrastructure, capital expenditure, and increased credit growth. Apart from government expenditure, improving sentiments from private sector and better capacity utilisation also hold the key to Indias economic growth. CPI inflation is projected at 5.1 percent for 2023-24.

Indian Logistics Industry Overview

Logistics sector plays a pivotal role in shaping up the economy by helping in movement of raw materials and finished goods. As India moves towards its goal of becoming a USD 5 trillion economy, the logistics sector will continue to evolve to meet the demands from traditional and new age businesses. The

Indian logistics sector is pegged to grow at a rate of 10-12 percent, to USD 380 billion by financial year 2025. Indias logistics cost is in the range of 12- 14 percent of GDP which is high as compared to developed economies that typically range 7-8 percent. The Government has taken initiatives that will help reduce the logistics cost to below 10 percent of GDP. These initiatives are in the areas of improving infrastructure, helping boost manufacturing, providing a digital landscape, and effective policymaking.

India moved up by six places to Rank 38 in the World Banks logistics ranking. Governments thrust on achieving best- in-class logistics costs and improving trade flows is led by flagship programmes like Make in India, PM Gati Shakti, Dedicated Freight Corridors (DFC), and Production Linked Incentive (PLI) schemes. Additionally, increasing e-commerce penetration provides a strong growth outlook for the sector. Significant opportunities emerge in the logistics value chain - Container trade, Transportation, Express Delivery, Warehousing, Processing, and Distribution. They key target themes/areas would include:

? Manufacturing: The government has set up Special Economic Zones which would attract foreign investments in the manufacturing sector, along with schemes like Make in India and Production Linked Incentive (PLI) to boost domestic manufacturing. The government is also promoting manufacturing of electronics and IT hardware in India. They are working on a plan for the next decade to position India as semiconductors manufacturing hub. There is a focus on making India competitive by creating a skilled work force and providing ease of doing business. The government is clear on its agenda of helping India carve its footprint in the global manufacturing landscape.

? Infrastructure: Development of countrys infrastructure is an important cog for the growth of logistics sector in India and the government is giving infrastructure development utmost importance. Under the Bharatmala Pariyojana, the government is looking to build approximately 34,800 kilometers of national highways. Other infrastructure initiatives like the sagarmala project and dedicated freight corridor will give a boost to the port infrastructure and support high-speed, long-distance movement of cargo through rail. Infrastructure development augurs well for the movement of goods and services.

? Policy: In September 2022, the Prime Minister launched the National Logistics Policy (NLP) which acts as a guiding document for States / UTs seeking to formulate logistics policy (19 States / UTs have notified their logistics policy). The policy will enable integration of digital system for smooth cargo movement. It will enable Unified Logistics Interface Platform (ULIP) which will show all available modes of transportation. Furthermore, NLP will create an ecosystem that will simplify rules for logistics businesses and will also enable officers from ministries to monitor logistics projects amongst other things.

Indian economy is a domestic consumption led economy with favorable demographics that acts as a backbone. As demand

(Source: IMF World Economic Outlook, RBI State of the Economy Bulletin - April and June 2023, Union Budget 2023-24)

for goods and service increases, the need for fast and timely delivery also increases. Both consumers and businesses need goods to be delivered at a rapid pace, which is giving rise to new trends in the logistics industry. Key trends in the logistics industry are as follows:

? Growing e-commerce: The e-commerce market in India is expected to grow to USD 350 billion in 2030 from USD 74.8 billion in 2022. This shall involve rapid growth in both Business to Business (B2B) and Business to Consumer (B2C) segments. With advancement in broadband technology, internet user base in India is set to expand further. The consumer base for e-commerce is on the rise and the demand for e-commerce from Tier II, III and IV towns is poised to increase. E-commerce is also enabling the small and medium businesses expand their reach.

? Digitalisation: Technology and data driven decision making are the future of logistics in India. Both businesses and customers would like to have their goods delivered fast along with transparency and visibility. For logistics companies things like demand forecasting, warehouse automation, and route optimisation are key to improving service delivery. Looking at the increasing pie of D2C in ecommerce, government of India has launched ONDC which gives small businesses the exposure to technology and a help create a level playing field.

? Express Logistics: Express delivery is the need of the hour for both businesses and customers. As customers are looking for faster delivery of products with improved visibility, companies are increasingly opting for express delivery for faster and on time delivery. The growing trend is evident across B2B and B2C verticals.

Logistical services can be bucketed into transportation, warehousing, and supply chain management. Transportation is the largest pie within the Indian logistics industry, accounting for ~60-65 percent of logistics costs. The movement of goods in India is tilted heavily towards road transportation which is followed by rail, shipping, and air. Road transport moves approximately 70 percent of cargo, rail moves about 20 percent, followed by shipping and air. Surface transportation offerings include Full Truck Load (FTL), Part Truck Load (PTL) and Express Logistics, which is the fastest growing. FTL players command about 90 percent of the road market share followed by PTL and Express at 7 percent and 3 percent, respectively.

The B2B segment forms a major share of the surface express logistics market with organised players dominating the large accounts while many small businesses and regional clusters are still catered for by smaller unorganised players as well. With growing consumption and e-commerce boom in India, the demand for express logistics is bound to grow from the small and medium as well as retail businesses. Major sectors that contribute to the growth of express industry are auto, pharmaceuticals, e-commerce, consumer durables, and apparels, amongst others. Express logistics provide additional benefits to customers like tech-driven offerings, reduced transit time, high reliability, better service quality, and high visibility. Many express players are also offering integrated services to clients such as warehousing and supply chain management.

About Gati

Gati, incorporated in 1989, is one of Indias oldest and leading express logistics players. The company boasts of a strong network and reach that covers around 99 percent of government of India approved pin codes. Gati is a multimodal express logistics player that provides end-to-end solutions to its clients including express distribution, air freight and supply chain management services. It also provides special services like student express, bike express, art express, and Laabh. Gati boasts a strong and longstanding relationship with marquee clients across sectors.

At the core of operations, lies a unique integrated network comprising of 18 Express Distribution Centers (EDC), 22 surface transshipment hubs, and 90 Gati Distribution Warehouses (GDW) along with a vendor network of 5000+ trucks. This is complemented by ~120 own customer convenience centers, ~500 franchisee convenience centers, and ~1500 business partners (Gati Associates).

Post its acquisition by Allcargo Logistics in 2020, Gati embarked on a road to transformation where the company restructured its balance sheet, improved its governance structure, reduced its debt, and moved on to the next phase of transformational growth Gati 2.0. Under Gati 2.0, the company laid down five pillars of growth that are a) digitalisation, b) sales acceleration, c) infrastructure, d) streamlining operations and e) talent pool. The company has carved out a path to profitable growth based on these pillars and is well on its way to achieving the same.

With Gati 2.0 the management continues its path to achieve sustainable profitability. The management continues to walk on the pillars of growth it had laid out with more vigor. Out of the mentioned pillars, Talent Acquisition of top management, which is a key differentiator between organisations, has been undertaken and the Company is now being driven by seasoned professional hands. Significant reinforcement has been made at mid-level as well. Right talent enables a right approach, well directed strategy execution, and ensure future readiness.

GATI 2.0 - The pillars of growth


Focus on digitalisation is to build an organisation with digital at its core, this will help improve customer experience and enable seamless efficient operations at the backend. The front-end efforts focus on CRM system, data science, digital payments, and sales acceleration. The back-end efforts focus on pickup and delivery automation, hub automation, network decision support and GEMS 2.0 (Gati Enterprise Management System).

During the year, the company implemented digital e-dockets for its retail clients and started the pilot for MSME clients. Auto approved retail digital docket is sent to the shipper immediately which improves efficiency and reduces the need for manual signatures. e-Dockets also help in clear demarcation of carrier and owners risk, enables e-billing which leads to compressed payment cycle, reduces need to use of multiple portals and supplements KYC and GST calculations, using a single portal. Gati also mandated GPS in all linehaul and feeder vehicles, to enhance visibility, improve performance and optimise productivity via continuous monitoring. Improvised on dashboard designs to enable real time data visibility and KPI monitoring.

The company is also working on using data science for route optimisation, load planning and better utilisation of trucks. Various stages of GEMS 2.0 are also under implementation, this is integrated with CRM, finance and other management tools, and provides one click view for performance analysis.

Sales Acceleration

Gati is focussing on a cluster based approach involving centralised rate cards for decisions on discounts and dynamic pricing. Central war rooms have been setup to tackle peak period demand. Customer experience is being enhanced through dedicated portal and chatbots. To obtain an optimal sales mix between key accounts, MSME clients and retail clients, a two-pronged sales strategy has been adopted. It involves identifying and penetrating new markets and increasing wallet share from current customer base. During the year, the company has elevated few clients from strategic accounts to key accounts owing to increased wallet share from them. Elevating clients enables them to get priority service. The sales structure has been re-aligned to ensure optimum service levels. Other initiatives like identifying alliance partners for strengthening our pickup and delivery operations and digitised network planning enable customer delight.


Infrastructure is one of the key pillars of growth. Gati has a network of 31 hubs including 9 air transit hubs. Gati is adding new superhubs and consolidating older hubs to improve efficiency levels. Four new operational hubs have been launched under this initiative. During the year, the management inaugurated three new hubs at Guwahati, Nagpur, and Mumbai. The super hub at Mumbai is built over 1 lakh sq. ft. with 61 bays. The management is well on its way to building five more such hubs in the coming years at Bengaluru, Indore, Pune, Hyderabad and Cochin. These will be future ready with automation in place that ensures faster loading and unloading, higher productivity, faster turnaround time, and improved load factor. The infrastructure expansion helps the company prepare and plan better for increasing demand. The Company also developed new franchisee PAN India in an endeavor to decrease first and last mile turnaround time, and costs while simultaneously increasing booking loads.


Location - The mega hub has an area of >1,00,000 sq ft providing economies of scale

Operational Efficiency - Vehicle turn around time is improved. Average vehicle unloading time is reduced by 45 minutes for 32ft SXL/MXL

Improved Manpower Efficiency- Achieved due to increased productivity per person Nagpur

Location - The hub is spread over an area of 28,800 sq ft and is centrally located near major clients

Operational Efficiency - The facility is equipped with 16 Bays, having 3 Dock Leveller

Clientele- Catering to Automobiles, Electrical, Apparels, Heavy Engineering Goods & Pharma Sector and handling approximately 300 tonnes per day


Operational Efficiency - The mega hub is spread over an area of more than 100,000 sq ft providing economies of scale

Operational Efficiency - The facility is equipped with 62 bays leading effective loading and unloading of trucks


Location - Spread over an area of 30,000 sq ft. The warehouse is adjacent to NH 31 and is situated in Brahmaputra Industrial Park equipped with better parking facility

Operational Efficiency-The facility is equipped with 7 Bays for effective loading and unloading

Network- One CCCO (Gati own pickup-delivery unit) merged with the STC for faster service to customers


Key focus area is to streamline operations and enable cost rationalisation along with continuous improvement with key enablers across the operations value chain. The aim is to reduce unit costs and maximise profit. This includes 1) centralised control of line haul and monitoring the entire line haul activity through a central network control tower, 2) modernisation of hubs, 3) planning peak and flex capacity, and 4) building an efficient pick-up and delivery mechanism. The management has an endeavor to convert its entire delivery fleet to electric vehicles (EV) and alternate fuels by 2025. The company is looking to introduce more than 2,500 EV in the next two years. The management has recently signed an MoU for delivery of 500 vehicles.

During the year, Gatis parent Allcargo Logistics announced its plan to acquire a 30 percent stake from KWE in GKEPL, a subsidiary housing the express business. The acquisition is a part of a well-planned strategy by Allcargo that involves further investment in the express business. Eventually, Allcargo acquired the 30 percent stake from KWE in June 2023, for a consideration of Rs.406.7 crores. The agreement was mutually agreed upon in the past by Allcargo and KWE. The strategic collaboration with Allcargo allows Gati to leverage its global network and allows opportunities to cross sell the offerings.

Financial Performance

During the year under review, at a consolidated level, Gati achieved a revenue of Rs.1,723 crores against Rs.1,489 crores in the previous year. Majority of the revenue for our company comes from the express logistics business housed under GKEPL that clocked revenue of Rs.1,469 crores against Rs.1,242 crores in the previous year. This was driven by total volumes (GKEPL: surface plus air express) growing 17 percent YoY, improving from 966 kt to 1,133 kt. Around 92 percent of GKEPL revenue came from the surface express business, followed by 5 percent from air express. In terms of client mix, 61 percent of GKEPL sales were driven by KEAs (key Enterprise Accounts), 21 percent by MSMEs and 18 percent by Retail accounts.

Gati reported an EBITDA of Rs.74 crore compared to Rs.50 crore in the previous year. Reported loss came in at Rs.11 crore as against a loss of Rs.4 crore in the previous year. Operating profit improvement for the financial year ended March 2023 is mainly attributable to the steadily improving efficiency across the company and key initiatives undertaken by the management to improve infrastructure and service levels for the customers.

Financial Ratios (Consolidated)


FY 2022-23 FY2021-22

Debtors Turnover

4.76 4.6

Interest Coverage Ratio

1.15 0.5

Current Ratio

1.19 1.0

Debt Equity Ratio

0.18 0.2

Operating Profit Margin (%)

5.39 3.3

Net Profit Margin (%)

-0.63 -0.3

Return on Equity

-0.05 -1%

Debtors Turnover: The increase in Debtors Turnover on account of growth in revenue and effective management of accounts receivable.

Interest Coverage Ratio: The increase in interest service coverage ratio can be attributed to higher operating income, indicating improved ability to meet interest obligations.

Current Ratio: The improved current ratio is mainly driven by a substantial cash inflow from the exercise of share warrants, significantly enhancing the companys liquidity and its ability to meet short-term obligations.

Debt Equity Ratio: Improved Debt equity ratio is on account of reduction in debt and inflow from share warrant conversion contribute to an improved financial leverage, reflected by a lower debt equity ratio.

Operating Profit Margin: The improved earnings results are a result of revenue growth and cost optimization initiatives implemented during the year.

Net Profit Margin: The decrease in net profit margin is a result of higher sales and lower costs, which were offset by higher taxes due to capital gains from the disposal of non-core immovable properties.

Return on Equity: The improved return on equity can be attributed to higher net income generated from increased earnings and more efficient utilization of shareholder equity.

Risks & Concerns

The financial and related risks have been comprehensively covered in the Annual Accounts of the company together with the mitigation strategy of the same. The present and anticipated future risks are reviewed by the management of the company at regular intervals. The management takes suitable preventive steps and measures to adequately safeguard the companys resources of tangible and intangible assets. For more detailed information regarding Financial Performance of the company you may refer Directors Report forming part of this Annual Report.

Internal Control Systems and their Adequacy

Gati has in place an adequate system of internal controls commensurate with its size and nature of operations, along with a well-defined organisation structure, documented policy guidelines and procedures, as well as predefined delegation of authority covering all corporate functions and

all operating units. These internal controls are designed to provide reasonable assurance regarding the effectiveness and efficiency of operations, the adequacy of protecting the companys assets from unauthorised use or losses, the reliability of financial controls, and compliance with applicable laws and regulations.

Adequate internal control measures are in the form of various policies and procedures issued by the management covering all critical and important activities viz. Contract Management, Operations, Procurement, Finance, Human Resources, Safety etc. These policies and procedures are updated from time to time and compliance is monitored by Internal Audit function. The company has continued its efforts to align all its processes and controls with global and industry best practices. The internal audit function based on the audits of operating units and corporate functions, highlights various risks and provides constructive recommendations on a regular basis for the Operating Units to improve on moderate and high-risk areas.

The effectiveness of internal controls is reviewed through the internal audit process, which is undertaken for every Operating Unit and all major corporate support functions under the direction of the Head Internal Audit. The focus of these reviews is as follows:

? Identify weaknesses and areas of improvement

? Compliance with defined policies and processes

? Safeguarding of tangible and intangible assets

? Management of business and operational risks

? Compliance with applicable statutes

? Compliance with the Gati Code of Conduct

The Audit Committee of the Board oversees the adequacy of the internal control environment through regular reviews of the audit findings and monitoring implementations of internal audit recommendations through the action taken reports submitted to them. A gist of the significant features of the internal controls is as follows:

? The Audit Committee comprising of Independent Directors and Non-Executive Directors, regularly reviews the audit plans, significant audit findings, implementations of internal audit recommendations, adequacy of internal controls, compliance with accounting standards as well as reasons for changes in accounting policies and practices, if any.

? A well-established and independent Internal Audit team consisting of professionally qualified accountants and functional specialists who are empowered to examine/ audit the adequacy, relevance and effectiveness of the control systems, compliance with policies, plans and statutory requirements.

? Process narratives and Risk Control Matrix for all major business processes and testing thereof including financial closing, IT General Controls and Entity Level controls which are reviewed for improvements.

? Continual programmes to reinforce the Code of Business Conduct & Ethics are conducted regularly across the organisation.

Anti-fraud programmes including whistle blower mechanisms are operative across the company.

The Board takes responsibility for the overall process of risk management throughout the organisation. During the financial reporting period ending March, 2023 the company has conducted an assessment of the effectiveness of the internal financial control over financial reporting and it has in place, adequate internal financial controls with reference to financial statements, commensurate with the size, scale and complexity of its operations. During the year, such controls were tested and no reportable material weaknesses in the design or operation were observed and the controls are continuously reviewed for improvements.

Human Resource

Nurturing human capital is of utmost importance at Gati. The company focusses on building a skilled resource pool while providing a healthy and safe environment for the employees to grow. The organisation had initiated project NEEV which is based on the principles of inclusion, empowerment, and unity in variety. The idea is to enhance employee engagement, focus on the learning & development programme, improve processes, employee effort and productivity, provide adequate infrastructure and hygiene and save on cost and time. The entire talent management process is based on the concept of three Es which are education, experience, and exposure. During the financial year 2023 there was a focused approach on learning and development (L&D) programme. The L&D programme was implemented across all levels in the organisation, starting from executives to senior leadership. Along with the L&D programme, employees are also given exposure and opportunities to grow within the organisation. As a result of all key initiatives, attrition rate has gone down to 18% in financial year 2022-23 as compared to 29% in financial year 2021-22. Human Resource is a key enabler for the organisation and plays a pivotal role in achieving organisational goals. Going forward, there will be emphasis on providing holistic development platform for the employees. Key focus areas will be on talent management and career planning for Hi posts, continuous employee engagement and wellness initiatives, and maintaining robust HR processes.

Cautionary Statement

Statements in the Management Discussion and Analysis Report describing the companys objectives, projections, estimates, expectations, or projections may be forward looking statements within the meaning of the applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could influence the companys operations include economic and political conditions in which the company operates, interest rate fluctuations, changes in Government/RBI regulations, tax laws, other statues, and incidental factors.