TNT Express today announced the sale of its loss-making Indian domestic road express business ina major strategic U-turn and will focus on international express to and from the country in
future.The disposal, effective from 30 December 2011, comes five years after the Dutch operator boughtroad trucking firm Speedage under ambitious plans to invest strongly in the country and challengeDHL for domestic market leadership.
The Indian road transport business will be sold to a logistics subsidiary of India EquityPartners (IEP), a US-based equity fund that invests in Indian companies and has a diverse portfolioof holdings in industrial and consumer goods companies. Financial details of the transaction werenot disclosed.
The CEO of IEP’s ‘Logistics Platform’ is Abhik Mitra, who was head of TNT India until earlierthis year.
TNT said it would work with IEP to ensure a seamless transition. The domestic road seniormanagement and most employees (approximately 1,000) will move to the new employer, andon-the-ground facilities, IT and systems and processes will be supported by TNT Express during thetransition process.
TNT Express spokesman Ernst Moeksis told CEP-Research that the company had decided to sell theloss-making Indian road express business for financial reasons after “an extensive review” of itsprospects. “Management has made an objective assessment of the situation in India and concludedthat the future benefits did not justify continued investment. As with any investment, theseare the types of decisions that need to be made from time to time,” he said. “In India, runninglosses plus the need for further network investments meant that the business case was notattractive enough.”
But he stressed: “The remaining businesses of TNT Express in India have positive operatingmargins.” There were few synergies and little cross-selling between the domestic and internationalbusinesses, he admitted. But TNT Express will continue to provide domestic air express serviceswithin India after the disposal, he added.
TNT’s domestic road express business accounts for about one third of the company’s overall €100million sales in India, with the rest generated by international and domestic air expresstransportation and other services. The domestic road operation has thus roughly doubled itsrevenues since the acquisition of Speedage, which had had profitable revenues of €17 million in2005-06. At present, TNT India has a pick-up and delivery setup spanning 614 offices, 1,530vehicles, 34 hubs, 592 depots and sortation centres. The road express operation accounts for asizeable part of this network.
The Dutch operator said in February 2006 that it planned to invest about €100 million in Indiaover the following five years and aimed to overtake DHL as domestic market leader by 2010. It firstopened new offices and launched domestic time-definite air express services, and then acquiredSpeedage to gain a road transport operation. The company’s name was also linked with other Indiancompanies, including independent operator Gati, over the following years. In early 2010, TNT wasstill optimistic about the domestic road operation, saying it aimed to build up “a strong,integrated air and road network” across India and with connectivity to China, Europe and SoutheastAsia. TNT’s India sales grew from €71 million in 2009 to €95 million in 2010, according to the 2010Annual Report, which highlighed “strong growth” in the Indian domestic business.
Following the domestic disposal, TNT Express India, now managed by Gerry Power, formerly incharge of TNT Express in Malaysia, will focus on inbound and outbound India services. In June, thecompany launched its first freighter flights between India and Europe with the start of a fivetimes a week dedicated B767 service between New Delhi and Liege. This enables TNT to offer anext-day delivery service from India to Europe.
TNT will also continue to provide customer-specific special services, in particular to thehealth-care and service logistics segments, while it will use IEP’s logistics subsidiary as itspreferred partner for domestic road delivery in India.
Asked whether the India sell-off would have any impact on TNT’s strategy in Asia or emergingmarkets, and specifically whether TNT was reviewing other domestic road businesses, Moeksisresponded: “There is no impact from this sale on other businesses. Each of the emerging markets isin a different stage of development and has its own challenges and opportunities. The situation ineach country is different and is assessed on its own merits.”
