Safe Express, India's largest express distribution company, has decided to foray into the lucrative air cargo business by acquiring two to three aircraft within next fiscal.
It also plans to acquire a domestic freight forwarding company to strengthen export shipment sector. The company has mandated two consultants for finding out the right fit for both aircraft and acquisition target. It will take a call within three months time on either cases.
Safe Express will be the second logistic player to own and operate cargo plane after courier company Blue Dart. However, Safe Express will concentrate on the shipment business whereas Blue Dart primarily focuses on documents. The move is spurred by the fact that the company gives 10 per cent of its business to carriers like Jet, Sahara and Indian Airlines for moving shipment.
"We may outright purchase or take lease of the aircraft. Following the clearance from Director General of Civil Aviation, we hope to start operation during April," Anil Syal, general manager (marketing), Safe Express, said.
Once the company has its own aircraft, it hopes to generate more volume apart from retaining present volume within itself. The domestic express air cargo business is about 20,000 tonne a month. Even as only high value items move by air freight, more companies looking at the cost benefit analysis to carry general cargo as well.
As for the acquisition plan, Safe Express has initiated dialogue with two companies. The freight forwarding business which involves picking cargo from factory gate, get customs clearance at sea or ocean port, book space in vessel and put shipment on board, is worth Rs 4,000 crore (Rs 40 billion) per annum.
With India's export clocking healthy growth, the opportunity is huge in the sector.
Safe Express clocked turnover is expected to touch Rs 350 crore (Rs 3.5 billion) from Rs 255 crore (Rs 2.55 billion) achieved in the last fiscal. However, 2005-06 will witness a quantum jump in the company's business with two new sectors opening up. Financing for acquisition of a company and aircraft will be done through internal accrual and debt.
Apart from new ventures, there will be growth in existing express distribution and third party logistics (3PL) businesses worth Rs 2,000 crore (Rs 20 billion) and Rs 3,000 crore (Rs 30 billion) respectively on national basis.
