The Logistics Headlines, New Dlehi, 26th March :With GST soon to raise its head, competition will toughen between logistics firms, making them to gear up resources to stay ahead in business. The battle between organized and unorganized companies shall increase, as customers will be able to offset the service tax. In the next 6 months, firms will get an idea as to which growth opportunities stand to benefit them because of GST.
Today, a majority of logistics business is handled by the unorganized sector because tax avoidance assists to keep the prices lower given India’s one-market theory. But, after GST comes to the plate, stakeholders will assume that customers could consolidate warehousing requirements to hub-and-spoke model for spearheading transportation solutions providers.
The inefficiencies on costs will reduce and inland transport will touch cost effective means, leading to greater business offers and expansion spaces.
Which Companies Saw a Rise and fall in Shares Gain?
The hype about GST seems brought ups and downs for logistics firms, for example: shares of Gati Ltd. And TCI Express Ltd has won 19% to 38% over the last two months. Allcargo Logistics Ltd however lost 5% and VRL Logistics focused on local logistics saw a rise, but less than 2%. The Allcargo and VRL are also behind on their one-year returns against BSE 500 index.
In recent weeks, some of the stocks did recover but the business environment is still subdued. Also, there is lack of clarity regarding the GST advantages. The logistics firm business model post GST roll out is also unsure, even if the management share varied insights on opportunities for growth.
Thus, customers will take some time to adjust to the new system and understand implications of GST before taking a cautious call.
How Will the Toil Between Organized and Unorganized Sector Shapeup?
Industry experts foresee a rise in sector consolidation with GST and unorganized companies shall move for tax net than losing their momentum. Thus, analysis predicts that there won’t be much of business for grabs because unorganized sector will still be in the business. There will be a definite increase in demand but the supply factor is still questionable. The companies from organized sector will have to articulate reasonably costing solutions to get some advantage over the smaller firms.
On the other hand, the smaller organizations will have to focus on niches to compete with the larger players in logistics arena. Despite of the struggles that each player will have to endure, the common belief concerning GST is that it will usher a positive impact for the industry, exemplified by already outsourcing of warehousing services by the private firms.
What are the Future Possibilities for Key Logistics Players?
The efficiency of GST will soon reflect significantly on the earnings for logistics industry in 2018-19 onwards, but the boost expected is not going to be easy. Depending on the client profile, region, companies will have to reconstruct strategies and plans for the services they offer to remain within a cost and time saving frame.
The next few months will provide a good approximation as to what type of prospects the GST will carry and how the companies will realign themselves to reap the best out of the change in goods and services tax.