Gati - Long race horse?

For Gati the journey has just started after a struggling existence of 25 years

  1. Mahendra Agarwal, founder and CEO of express distribution and supply chain solutions provider Gati Ltd, received the ‘Logistics Promoter Award’ at the ‘LogisticsTalent Hunt 2012’ for his contribution to the logistics industry by encouraging the profession through promotion & attraction of the right talent. Mr. Agarwalestablished Gati in 1989 with an aim to revolutionize the logistics industry. In June 2008, he was awarded ‘Best Entrepreneur of the Year’ by the Hyderabad ManagementAssociation. He also received the ‘Lifetime Achievement Award’ at the 4th Express Logistics & Supply Chain Conclave on 30th Sep 2010 in Mumbai. In February 2012 he wasawarded ‘Executive of the Year’ (Logistics) by the Indian Chamber of Commerce (ICC) for his contribution to the Indian supply chain & logistics industry.

  2. Company identified potential of E Logistics business and is growing it as a separate business vertical since FY 2011-12 which is growing at 10% month on month and100% year on year.

  3. Fleet strength of over 4,500 vehicles and a warehousing capacity of 2.6mn sq. ft. It Covers 667 district out of total 671 districts.

  4. FY15E ROE is 5% and ROCE is 8% - it is low but improving over time. GST implementation from April 1, 2016 will increase the margins due to less taxes, less waitingtime, less corruption etc.

  5. Sale of loss making ship business has helped in improving margins.

  6. Capacity to deliver over 23000 shipments per day and a target to deliver 1 million packages per day by 2020 (40 times growth target)

  7. Indian ecommerce market expected to grow from 5 billion dollars to 50 billion dollars in 2020.

  8. Clients look for end-to-end solution including international freight forwarding, customs handling, import ofgoods, warehousing, cold storage and last-mile delivery to the end-customer (B2B, B2C) which Gati offers.

  9. Debt to equity ratio is just 0.51, Market cap to sales is 1.5, PE ratio is 44 on a forward basis which is not expensive looking at the present growth rate and future potential.

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Gati seems to doing right things currently namely and seems correct way to ride e-commerce potential growth trend

1.E-commerce growth focus

2). Cold Storage Chain entry

3). Gave Dividend payout in Dec

but one need to keep a watch on following

1). High Promoter’s share pledging

2). Debt Reduction

3). Equity Dilution for growth & new business

4). Complete Sale of Loss making Shipping Business

5). Govt focus on enabling Post Offices as e-commerce enabler

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Hi Ashish

No doubt, Points 1,2 and 3 need to be watched carefully. I am betting on future growth taking care of these problems.

Point 4 is positive only and helping in increasing the margins.

Point 5 is not a worry because even after Post office taking lion’s share Gati can still capture 10% of 5 billion dollars logistics market (10% of 50 billion e-commerce market) by 2020. That is 30 times of current revenues from the e-commerce division.



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After GST implementation,inventory cost will come down by four percent so Gati cost will also come down somewhere around that region of 4-5 percent in terms of movement of the parcels across the country.

Read more at:

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This incidentally is my first post on the forum, been a long time social loafer here, have benefited a lot from fellow contributors and will try to contribute in what little way I can. I am a novice investor and looking at the quality of fellow boarders here, am likely to remain so for many years to come!.

This thread is not replenished with latest updates since a long time, much water passed under the bridge, company from its latest annual report seems to be taking right steps, it seems to be moving forward addressing the market and bottlenecks that the industry reports tend to highlight, consciously seeking to develop competitive advantage along the way. Some of the points from its latest annual report management commentary is shared below for discussion. I am a novice and mostly story person, relying on and humbly requesting our team strength to fill in gaps on the accounting side.

Looking at various logistics industry report, few key points that came out were India’s cost of logistics as % of GDP is on higher side ~13%, for transportation we are heavily reliant on the most costliest means of transport - Roads, the most economical means Waterways is still in its nascent stage. To control inflation road transport costs have to be under control/more efficient. GST seems to address part of this problem with seamless movement of vehicles between state boundaries. India also faces critical shortfall on Warehouse capabilities and Cold storage capabilities. GST will encourage consolidation of current regional warehouses into hub and spoke model. Adoption of technology will remain key to bring in operational efficiencies and customer delight.

Some of the highlights from Gati management (marketing) commentary from its annual report:
Its focus is on e-commerce delivery channels. Should benefit from GST as fleet utilization will go up. Holds leadership position in Express delivery, serves 99% districts. Handles 70,000 packages a day today, up from 22,000 packages in 2014, has capacity to delivery 80,000 packages a day. SFA deployed, all 7 stages operational, indias only express delivery logistics company to offer end to end track and trace (not validated, this is as claimed in the annual report). Shop floor automation will bring operational efficiencies. Company has embarked on IT roadmap planning GEMS 2.0 by 2020 to meet changing industry needs, the recommendation is being done by a one of big four consulting company. Commissioned cold storage capacity, 24hr pan india delivery capability. 3.3 mil square feet tech enabled warehouse.

Open questions, risks that I sense but unable to understand or resolve:

  1. FCCB issue, it is settled now, but what does that settlement mean really?
  2. As noted in the original post of this thread, promoter pledge is still a concern.
  3. Not able to understand the rental income generated from 3.3 mil square feet warehouse.
  4. Why does the CEO, MD name appear in related party transactions, is this okay?
    Several other risks that I have surely missed.

Appreciate and will be thankful if fellow boarders can chip in to build on this story further. I do not have any position yet, and the content posted is from various industry reports and company annual report. Apologies in advance for any mistake in my interpretation and post here.

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Gati Q2 Result

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Stock is down 11 %… Is there any negative news ?

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Reliance MF dumped huge @RS 89, further it trigger stop loss for others at 90.Will regain.

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Gati with new partner wants to augment the future growth of the company.

Probably new partner could give new life to Gati.

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TVS Logistics Planning to buy stake in Gati Ltd worth Rs 1500 Cr as per latest report.


Contineously down, anything wrong with fundamentals…

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Gati can be considered as low quality stock considering last 3 quarterly results. Even at price of Rs 68 it is trading at PE Ratio of 23.60. So it is not cheap from valuation perspective.

Though it is showing Debt to Equity ratio as 0.3, Long Term Borrowings to Profit ratio 10. So Gati’s stock price is getting punished as Small cap index has hit most.

Gati can be considered as turnaround candidate only if it’s quarterly results for next 2-3 sessions able to show good numbers.

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Some positive news.
It’s a major contributing subsidiary to Gati, so acquisition by TVS logistics and separate listing will unlock its value. Also tentative timeline is Nov, so we do have a timeframe.

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Concerning developments -

  • Promoter pledge @ 74.19%
  • Promoter shareholder coming down consistently QoQ (from 37.12% in March 2017 to 20.87% in March 2019)

Possible positive news surrounding this is the announcement from TVS Logistics



Source: Stock Edge app → Share holding

Disclosure: Invested

Promoter SH is down to 14.8%. Wrote to IR cell couple of times with no response.

Disclosure: Exited.

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From the above I see that the proposed tendering period, to participate in the open offer, is between Jan 28 to Feb 10…hence, I would like to know if I buy GATI now ( considering the bargain.i.e today’s closing price of 58.25 vs open offer price of 75), will I be eligible to participate in the open offer.

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You are eligible to tender in the open offer. Anyone can buy the stock from the open market and tender as long as the Open Offer is not closed.

However the risk here is that not all the tendered shares may be accepted. The shares that come back to you, may trade at a much lower price. So one has to factor that aspect before thinking about buying from the market and tendering in the open offer.


Gati seems to be an interesting case due to following:

  1. Typical case of management change- from inefficient to good management.
  2. Market leader in the category.
  3. Rapidly growing market. As per reports express distribution market will grow at 15% for next couple of years.
  4. GST, E-way bill a big positive.
  5. Sector is major beneficiary of unorganised to organised.
  6. Issue of low promoter holding and pledge will be thing of the past.
  7. reduction in debt as intended by the new promoters,

I understand that above factors are very positive and if thesis played out well then this stock has potential to give multibagger return.

Risks: potential risk of tax liability of Rs 23cr as indicated by the auditors in the AR.
2. slowing economy.

Most important thing is that NO BODY CARES ABOUT THIS STOCK AT THIS JUNCTURE hence value is deeply depressed…have a look at other competitors…

Do your own research… views both positive and negative are most welcome…

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Does anyone know the reason for fall, it slid 50% after open offer.
I can see few of the pledges have been invoked.
Also promoters holding have reduced by 50% in an year.

Is there any silver lining for GATI?

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