FedEx has missed the India bus so far. Can the logistics giant win back lost ground from the competition that is miles ahead?
Across the world, the $39-billion FedEx is clearly Achilles, the sector leader. But in India, even after running for 15 years, it hasn’t been able to close the gap with DHL.
DHL’s Indian operations closed 2010 with Rs. 823 crore in revenues and a profit of Rs. 31 crore. FedEx’s income statements for its Indian operations are not readily available (only the balance sheet is), but our estimates (calculated using earnings per share and changes in balance sheet) show that it incurred losses of Rs. 4 crore for 2010. Forbes India sent this figure to FedEx for clarification. In its reply, FedEx did not confirm or deny these numbers. It added that the company does not report numbers on a country or regional basis.
Why has FedEx fallen behind and can it catch up? One key reason is that FedEx had never taken the India opportunity seriously and was caught napping as the Indian logistics market exploded. According to a study by Frost and Sullivan, the Indian logistics market is pegged at $75.19 billion, about 6.2% of India’s gross domestic product (GDP) and 11.6% of the services GDP in 2010. It is projected to grow to $120.42 billion in just three years from now, as manufacturing expands faster and gives a fillip to the logistics business.
But it appears FedEx has finally woken up. “We now have our stake in the ground there,” says Rajesh Subramaniam, senior vice president, international marketing, FedEx Services, speaking on the phone from Memphis, USA. Subramaniam, born in Thiruvananthapuram and a graduate of the Indian Institute of Technology Bombay, has been bullish on India for years. It is clear that the top brass in Memphis now agrees with his view because early this year FedEx acquired AFL (formerly known as Airfreight) and its subsidiary Unifreight for about Rs. 200 crore. Even three years ago, such an acquisition would have been unthinkable.