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Founder & CEO’s Review

Gati Founder & CEO

Dear Shareholders,

Against the backdrop of moderate business environment and after-effects of demonetisation, FY2016-17 was a challenging year for your company. Despite the challenges, I am glad to report that we made significant advances to establish the direction for longer-term success. Beyond the immediate horizon, we are encouraged by the improvement in the macro-economic trends and structural changes, especially the GST roll-out, which will help strengthen competitiveness and grow market share. With its diversified product portfolio, discipline to provide quality service, and the people talent, the company is confident of growing in ways that create long-term shareholder value.

Performance highlights
The full year growth was moderate and chiefly affected by e-Commerce growth stagnation and lingering effects of demonetisation in select industry verticals. The post festive slowdown in ecommerce industry and the slow tapering down of demonetisation effect on both B2B and B2C segments had a material impact on your company’s performance.
Emerging Opportunities
As widely reported, GST is perceived as the most wide-ranging tax reorganisation and targets to make India into “One Nation, One Tax, One Market”. The structure proposed under the GST offers an ideal opportunity for organisations to re-engineer their existing supply chain networks to reduce inefficiencies. With its comprehensive integrated service portfolio, Gati is distinctively positioned to support the consequent supply chain realignment. Chiefly, the company’s pan-India reach has been already designed on a hub and spoke model for efficiency and speed.

A GST structure will also support reduction of bottlenecks like border check-posts, and aid in faster flow of shipments by improving average speeds and subsequently increasing your company’s fleet utilisation. Information technology will be a critical differentiator in the logistics industry post-GST, not only in terms of compliance to the GSTN Network but also providing the better shipment visibility to customers.

Over the course of several months, your company has taken affirmative steps on compliance, operations, technology and manpower training to be ready for GST. Central to your company’s GST value proposition is the idea of “helping customers unlock the GST advantage”. The objective is to help customers have control of their domestic supply chain, make informed decisions based on demand and supply patterns, and have confidence in the pan- India network adjustments they make.

Our Business, Operations and technology Strategies
Over the last few years, the company has undertaken significant initiatives to fortify its stronghold to deliver consistently to customers, by developing end-to-end solutions, enhancing technology capabilities and augmenting operations quality processes. These strategies are based on the fundamental premise that customers will continue to seek larger role of logistics service providers like Gati, who can integrate their unique supply chain requirements. Recent portfolio enhancement with the launch of Gati Fulfilment Services and commissioning of cold chain warehouses are reflective of this very perspective.
On the core express distribution business, the company is committed to maintaining its pan-India network and service leadership, in the post-GST environment. Specific medium to long-term changes in domestic supply chains like consolidation of customer warehouses will necessitate improvement in service levels to areas outside the major metropolitan centers. Likewise, our team has proactively worked on optimising the delivery network, basis a predictive logic of load movement post GST. Additionally, Gati is expanding its portfolio of multi-modal distribution and warehousing solutions, offering customers more customisation in serving their emerging needs.

With the launch of its ambitious Shop-Floor Automation (SFA) initiative in early FY2017, your company reached a vital milestone. This package-level visibility through 100% Bar Code scanning is unprecedented in the domestic express distribution sector, especially in the context of Gati’s scale and reach. With all the complexities, the undertaking took time to stabilise and I am happy to report that the automation is fully-implemented with a positive impact on customer experience and productivity. Going forward, Gati will continue to advance such technology interventions to provide operational scalability, cost optimisation and service improvement needed to support future growth opportunities and enhance profitability.

In November 2016, the company invested in BrownTape, a technology platform that helps online sellers on multiple e-Commerce marketplaces to manage their orders from a single window. The alliance will work on the vision of simplifying e-Commerce for all levels (small, medium, and large) of online sellers, who will be able to manage their e-Commerce ecosystem seamlessly.

To gain further penetration into consumer retail, your company is also developing solutions that integrate the online and offline shopping channels available to consumers. The strategy leverages the company’s competitive edge on account of its experience in handling both Business- to-Consumer and Business-to-Business channel logistics, and will result in longer and more profitable business relationship with customers.
Training
Gati’s longstanding investment in building people’s skills and capabilities is essential to maintain leadership position in a competitive market. In FY2016-17, the company introduced learning interventions to meet talent requirement across the diverse pan-India talent base. A Specialised skill development centre was inaugurated during the course of the year to focus on driver safety and training across India. Additionally, cross-functional teams across all locations have been put through rigorous GST training for ensuring flawless roll-out and execution.

Building Sustainable Communities
Gati considers that operating in a responsible way is vital to fostering a strong business for its people, customers, and the society in general. In line with this, several activities towards Corporate Social Responsibility were carried out in FY2016-17. Community efforts took on special meaning in Bihar and Assam in July-August period, where communities were put in extreme conditions following wide-spread flooding. Gati`ites were actively involved in the flood relief activities, leveraging on the company’s logistics capabilities and reach. Another notable activity was the commissioning of solar-powered deep water pumps in the Nagarjuna- Srisailam tiger reserve in collaboration with WWF India. In almost half a year of its installation, this unique system based on clean and renewable energy has been serving the water-scarce areas of reserve forests.
The future
As the industry evolves in the post-GST environment, your company will command the advantages of competing in a larger market with opportunities for service innovation. In fact, Gati’s Vision 2020 is centered around providing end-to-end logistics solutions, tailor-made to customer specific needs. Our focus remains on improving customer experience, leveraging our network advantage and creating avenues toward long-term shareholder value. I thank you for the unrelenting confidence in your company and its management.

Regards
Mahendra Agarwal
Founder & CEO

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