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Best Logistic Stocks in India

Best Logistics Stocks in India

Logistics is a rapidly growing sector in India.

The sector has been growing at a rapid pace and is expected to reach US$ 380 bn mark by 2025. Constant growth in online buying and thus e-commerce business, and the onset of many direct to consumer businesses have augured well for the industry in the last couple of years.

Adding to the growth are the new policies that are set to give the industry a much-needed push.

In the Union Budget 2022, the government announced the ‘Gati Shakti Plan’ with plans to improve connectivity, develop dedicated freight corridor and tech-driven warehousing.

Then there’s the draft National Logistics Policy 2020.

Although meant to cater to the emergency vaccine transportation needs in immediate future, the policy could serve a lot more. It encompasses...

  • Providing unique numbers to logistics service providers to track and trace them.
  • A national registry of warehouses with geo tags providing available space information.
  • Co-funding intermodal transport, warehousing, and handling facilities.
  • Development of silos for bulk storage on government land through public-private partnership.

If the cards are played right, the sector has the potential to create huge number of jobs for the countrymen and play a key role in driving the economy on a high wave.

The introduction of GST has already brought some efficiency to the system, which can be seen in the reduced turnaround time for trucks.

Geotagging of warehouses and encouragement of “IoT” in warehousing will be another factor that will remove inefficiencies further.

Porter’s Five Forces Analysis of the Logistics Sector in India

Porter's Five Forces is a model that identifies and analyzes five competitive forces that shape every industry.

These are barriers to entry, bargaining power of suppliers, bargaining power of customers, threat of substitutes and competition within the industry.

A change in any of the forces normally requires a company to re-assess the marketplace.

Let us have a look at how these five forces shape the logistics sector -

#1 Barriers to Entry

The most attractive segment is one in which barriers to entry are high as they restrict the threat of new entrants.

Conversely if the barriers are low, the risk of new companies venturing into a given market is high.

In the logistics sector, barriers to entry are high, as it requires high capital investment, adequate cash flows, and technical expertise and know-how.

#2 Bargaining Power of Suppliers

The bargaining power of customers is the ability of suppliers to put the firm under pressure. Suppliers may refuse to work with the firm or charge excessively high prices for unique resources.

This is low in the logistics industry, as the number of suppliers is low as there are only a few shipping companies that dominate the market.

#3 Bargaining Power of Customers

The bargaining power of customers is the ability of customers to put the firm under pressure. It is high if buyers have many alternatives and low if they have few choices.

In the logistics sector, the bargaining power of customers is high, as customers are from all over the world. Switching costs are also low as customers can switch to another company from any part of the world.

#4 Competition

For most industries, having an understanding of the competition is vital to successfully marketing a product.

The competition in the logistics industry is high, as logistics players not only face competition from domestic players but from international players as well.

#5 Threat of Substitutes

A substitute product uses a different technology to try to solve the same economic need.

This is moderate-high for solid cargo. Customers can switch to substitutes such as airlines, trucks or goods trains if there is a change in quality of service, increase in freight rates and transit time.

Porters Five Forces Analysis of the Logistics Sector in India

Source: Equitymaster

When to Invest in Logistics Stocks

As the demand for the logistics sector is closely linked to the economy - global and domestic, logistics stocks are usually riskier - their fortunes are prone to economic booms and busts.

For this reason, they are often called cyclical stocks. Generally considered an offensive tactic in investing, cyclical stocks can be used to generate high returns when the economy is doing well.

Therefore, the best time to buy such stocks (logistics stocks) is at the start of an economic expansion and the best time to sell them is just before the economy begins to slow down.

Key Points to Keep in Mind While Investing in Logistics Stocks

Here are some key points to take note of before you invest in logistics stocks.

#1 Crude Oil Prices

Crude oil prices have a constant effect on the logistics industry.

Rapid increases in the price for fuel can have a devastating effect on freight management companies, and a sudden fall could result in short-term boosts in profit and a surge of competition within the market to provide consumers with the lowest price.

Hence, look for companies that have the ability to pass on these costs and restructure or strategize their operations to ensure continued profit. Also, look for companies that hedge crude prices with derivative contracts.

#2 Profitability of the company

Profitability is the primary goal of all business ventures. Without profitability the business will not survive in the long run. So, measuring current and past profitability and projecting future profitability is very important.

Here’s a list of top logistics companies in India based on their consolidated net profit.

Company Name Net Profit (in Rs m) Net Profit Margin
Adani Ports and Special Economic Zone Ltd. 46,024 28.88
The Great Eastern Shipping Company Ltd. 6,297 17.95
Shipping Corporation of India Ltd. 6,179 16.68
Container Corporation of India Ltd. 4,693 7.19
Aegis Logistics Ltd. 3,849 8.31
Blue Dart Express Ltd. 3,822 8.67
Transport Corporation Of India Ltd. 2,652 8.14
Gateway Distriparks Ltd. 2,230 15.81
Shreyas Shipping & Logistics Ltd. 2,048 38.23
Gujarat Pipavav Port Ltd. 1,932 25.99
Source: Equitymaster

Data as of March 2022

#3 Debt to equity (D/E) ratio

A company uses both equity and debt to run a business. However, the amount of debt it uses indicates its fixed obligations. Higher the leverage, higher will be the fixed charges such as interest expense which will lower the profitability.

One must look for a debt to equity ratio of one or less than one.

Here’s a list of top logistics companies in India with a low debt to equity ratio.

Company Debt to Equity Ratio
Container Corporation of India Ltd. 0.01
Transport Corporation of India Ltd. 0.04
Mahindra Logistics Ltd. 0.06
Seamec Ltd. 0.16
Aegis Logistics Ltd. 0.18
Blue Dart Express Ltd. 0.23
Source: Equitymaster

Data as of March 2022

#4 Return on Capital Employed (ROCE) ratio

Along with a low debt to equity ratio, a one must look for a high return on capital employed (ROCE).

Return on capital employed measures how much profits the company is generating through its capital. The higher the ratio, the better.

An ROCE of above 15% is considered decent for companies that are in an expansionary phase.

Here’s a list of top logistics companies in India with more than 15% in ROCE.

Company Name ROCE (%)
Blue Dart Express Ltd. 53.06
Shreyas Shipping & Logistics Ltd. 30.08
Lancer Containers Lines Ltd. 25.00
Agarwal Industrial Corporation Ltd. 20.41
Transport Corporation Of India Ltd. 21.48
Aegis Logistics Ltd. 20.09
Source: Equitymaster

Data as of March 2022

#5 Valuations

Investing in stocks requires careful analysis of financial data to find out a company's true worth. However, an easier way to find out about a company's performance is to look at its financial ratios.

Being an asset heavy and cyclical business, the commonly used financial ratios used in the valuation of logistics stocks are -

Price to Book Value Ratio (P/BV) - It compares a firm's market capitalization to its book value. A high P/BV indicates markets believe the company's assets to be undervalued and vice versa.

To find stocks with favorable P/BV Ratios, check out our list of stocks according to their P/BV Ratios.

Price to Earnings Ratio (P/E) - It compares the company’s stock price with its earnings per share. The higher the P/E ratio, the more expensive the stock.

To find stocks with favorable P/E Ratios, check out our list of stocks according to their P/E Ratios.

#6 Dividend yields

There is no consistent trend of dividends across the industry, with different companies having different dividend policies.

For more details, check out our list of top logistics stocks offering high dividend yields.

Top Logistics Stocks in India

The top logistics stocks in India can immensely benefit with so many factors positively affecting the industry.

Here are the top logistics stocks in India which score well on crucial parameters.

#1 Transport Corporation of India

#2 Blue Dart Express

#3 Aegis Logistics

Check out Equitymaster’s stock screener which filters the top logistics companies in India.

List of Logistics Stocks in India

The details of listed media companies can be found on the NSE and BSE website. However, the overload of financial information on these websites can be overwhelming.

For a more direct and concise view of this information, you can check out our list of logistics stocks.

You can also check out the latest logistics sector results.

Best Sources for Information on the Logistics Sector

Ministry of Ports, Shipping & Waterways -

Indian Brand Equity Foundation Media Sector Report -

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

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