Logistics sector in India: express, warehousing, and 3PL

The starting point: why logistics cost so much

India's logistics cost was historically estimated at 13–14% of GDP— nearly double the approximately 8% observed in the United States and the 9–10% range seen in China. This gap was not a natural feature of India's geography; it was the product of structural inefficiencies that accumulated over decades and that policy action has been progressively trying to address.

Understanding why logistics was expensive requires understanding the industry's starting conditions. The Indian trucking industry was — and to a significant degree remained — dominated by small owner-operators who typically owned one or two trucks. This extreme fragmentation meant there was no centralised load optimisation, no real-time fleet management, and limited ability to invest in vehicle quality or driver training. A large shipper had to deal with thousands of individual operators or go through a broker intermediary who earned a margin on each transaction.

Infrastructure was the second constraint. India's National Highway network was historically under-built relative to the scale of the economy. Poor road quality, frequent overloading norms, and the absence of expressways between major cities meant average freight speeds were much lower than in comparable economies. A truck moving freight between Mumbai and Delhi historically took 48–72 hours on road; a comparable trip on a modern highway network in a more infrastructure-rich economy would take half that.

The third — and perhaps most analysed — structural inefficiency was the pre-GST tax regime. Before the Goods and Services Tax was implemented in July 2017, goods moving across state borders were subject to a patchwork of taxes: Central Sales Tax on interstate sales, entry taxes charged at state borders, and in some cities an additional levy called octroi. To minimise these taxes, companies were incentivised to hold a warehouse in every state they operated in — even if a single, larger, better-located warehouse would have been more operationally efficient. This warehousing proliferation added cost at every link of the chain.

GST as a structural tailwind

The implementation of GST in 2017 was widely described as the single largest structural reform for the logistics sector in a generation. It replaced the fragmented, multi-rate, state-specific tax architecture with a unified national indirect tax, removing the primary economic incentive that had driven the state-by-state warehousing model.

The immediate consequence was warehouse consolidation. Companies could now legally supply the entire country from a strategically located central hub or from a small number of regional hubs — without incurring punitive interstate tax costs. This drove demand for large, Grade A warehousing parks near major highway junctions and port gateways. Locations like the National Capital Region, the Mumbai Metropolitan Region (Bhiwandi, Pune), Bengaluru, and Chennai saw material upticks in warehousing demand from both domestic FMCG companies and international retailers.

The shift also accelerated the move from in-house logistics to third-party logistics (3PL). Once a company was running from fewer, larger warehouses, it made more economic sense to hand the entire operation to a specialist 3PL provider who could spread fixed infrastructure costs across multiple clients, invest in warehouse management systems, and offer service-level guarantees that a company's in-house operation could not easily match.

The check-post system — physical inspection points at state borders that historically delayed trucks by hours at each crossing — was also dismantled in conjunction with GST implementation. Industry participants widely reported that transit time reductions of 20–30% were observed on major corridors in the initial years post-GST as trucks no longer queued at border check-posts.

Mapping the segments: how the industry is structured

The logistics industry is not a single business — it is a collection of distinct segments that serve different customer needs, operate on different economics, and attract different types of players.

Full Truckload (FTL) and Part Truckload (PTL)

Full Truckload (FTL) is the most basic form of road freight: one shipper books the entire capacity of a truck for a single shipment, typically going point-to-point from origin to destination. FTL is efficient for large consignments and is the dominant mode for manufacturing companies moving raw materials or finished goods in bulk. Margins are thin and competition is intense because barriers to entry are low — anyone with a truck can offer FTL. Large FTL operators historically competed on fleet size, route coverage, and relationships rather than on branded service quality.

Part Truckload (PTL) — also called LTL (less-than- truckload) in some geographies — involves consolidating smaller consignments from multiple shippers onto a single truck. The logistics company maintains a network of hubs where freight is sorted and redistributed onto outbound vehicles headed for the destination region. PTL is more complex to operate than FTL (it requires hub infrastructure and multi-leg routing), but it earns higher revenue per kg and has stronger barriers to entry because a functional PTL network requires a hub presence in every major city. Companies like TCI Express and VRL Logistics built their franchises on dense surface express networks that combined PTL economics with transit time guarantees.

Express cargo and courier

Express cargo sits above PTL on the service quality spectrum — it prioritises defined transit times and door-to-door delivery over pure price competitiveness. Express networks use a combination of air and surface modes, depending on the weight and urgency of the shipment. Blue Dart, a subsidiary of DHL, was historically the dominant player in the premium end of the express market in India, serving time-sensitive pharmaceutical, financial document, and high-value shipments.

The courier segment — lighter-weight packages, primarily B2C and B2B document delivery — saw explosive growth with the rise of e-commerce. Delhivery emerged as the largest Indian-origin express and courier network, having initially built its business heavily around Flipkart's logistics requirements before diversifying its client base across multiple e-commerce and D2C brands.

Warehousing

Warehousing has evolved from a passive storage function into an active fulfilment operation. Modern logistics parks offer automated storage, pick-and-pack services, inventory management integration, and quality control. The key distinction in the market is between Grade A warehousing — large, modern facilities with high clear heights, level floors, dock levellers, fire suppression systems, and good highway access — and older, lower-spec godowns that lack these features.

Post-GST demand consolidation drove investment in Grade A logistics parks, with developers including Embassy Logistics, IndoSpace, and Welspun One building large-scale parks near major consumption and manufacturing hubs. Occupancy rates at well-located Grade A parks were reported as strong through much of the early 2020s as demand from e-commerce, 3PL operators, FMCG companies, and auto ancillaries outpaced supply.

Cold chain

Cold chain logistics — temperature-controlled storage and transportation for perishables, pharmaceuticals, and chemicals — was historically one of the most underdeveloped segments of India's logistics infrastructure. India's cold storage capacity was concentrated primarily in potato storage in the northern states, with limited capability for other food categories or for pharmaceuticals. This contributed to significant post-harvest food losses, estimated at 15–25% of produce in some categories.

The growth of organised retail, quick commerce, and pharmaceutical exports drove investment in cold chain infrastructure from the 2010s onward. Mahindra Logistics and several organised players began building dedicated pharma cold chains; quick commerce companies like Zepto and Blinkit required ultra-cold dark store infrastructure in tier-1 cities. Cold chain remains a capital-intensive, specialist segment with higher margins than ambient warehousing.

Third-party logistics (3PL)

3PL providers offer integrated supply chain management rather than just transportation or storage in isolation. A 3PL contract typically covers inbound transportation from suppliers, warehousing and inventory management, order processing, pick-and-pack, outbound transportation to customers or retail outlets, and returns processing.

The economics of 3PL are built on the provider's ability to optimise across clients — sharing warehouse space and transportation capacity between non-competing clients, investing in technology (warehouse management systems, transport management systems) that individual client in-house operations would not justify. Revenue is typically structured as a cost-plus management fee on a multi-year contract. Asset-light 3PL models own the technology and management layer but lease rather than own the physical infrastructure. Asset-heavy models own warehouses and fleets.

Mahindra Logistics and Allcargo Logistics were among the listed players building 3PL capabilities. Container Corporation of India (Concor) historically dominated rail-based containerised logistics connecting ports to inland container depots.

Last-mile delivery

Last-mile — the final leg of delivery from a fulfilment centre or sorting hub to the end consumer — was historically the most expensive per-unit segment in e-commerce logistics. Delivering a package to a dense urban apartment building requires a human, a vehicle, and multiple attempts if the customer is unavailable. Costs per delivery in India ranged widely depending on geography, order value, and whether delivery was attempted in tier-1 cities or smaller towns.

The competitive dynamics of last-mile in India were shaped by aggregator platforms (Delhivery, Ekart which was Flipkart's in-house arm, Amazon Logistics, Shadowfax) that built gig-economy delivery fleets. Cost per delivery became a key battleground as e-commerce volumes scaled and merchant margins thinned.

Key metrics for analysing a logistics company

Revenue per shipment / Revenue per kg

For express and courier businesses, revenue per shipment or revenue per kg is the fundamental unit economics metric. It captures the pricing power of the network. As volumes scale, revenue per shipment can decline due to volume discounts for large customers, but this should be offset by improving cost per shipment from better route density and hub utilisation.

Tonnage

Tonnage (or shipment volume for courier) is the volume metric. Year-over-year tonnage growth tells you whether the business is gaining or losing market share and whether the industry is growing. For surface logistics companies, tonnage growth was historically correlated with industrial production and retail sales growth.

Occupancy rate (warehousing)

For warehousing businesses, occupancy rate — the percentage of available square footage that is leased and occupied — is the primary operating metric. A warehousing portfolio running at 85–90% occupancy generates strong returns on invested capital; one running at 60% may not cover its cost of capital. Occupancy is driven by proximity to demand centres, specification quality, and lease tenure.

EBITDA margin

Logistics EBITDA margins vary dramatically by segment. Asset-heavy models (owning fleet and warehouses) typically generated EBITDA margins in the 10–15% range. Asset-light 3PL models that outsource most of the physical infrastructure could generate higher EBITDA margins on a smaller revenue base. E-commerce logistics operators were historically loss-making or breakeven at the EBITDA level in their early growth phases as they invested in network coverage ahead of profitability.

Asset-light vs asset-heavy models

The asset-light versus asset-heavy distinction is important for valuation. A company that owns its trucks and warehouses has higher fixed costs, more capital employed, and stronger operating leverage (better margins when volumes are high but significant losses when they fall). An asset-light operator leases capacity and earns a management margin — lower absolute EBITDA but higher return on capital. Analysts often value asset-light logistics companies at higher EV/EBITDA multiples than asset-heavy peers for this reason.

E-commerce logistics: the transformative demand driver

The growth of e-commerce — led initially by Flipkart, Amazon India, Snapdeal, and later by Meesho and quick commerce — fundamentally restructured the logistics industry's growth profile from the mid-2010s onward. Before e-commerce, logistics demand was primarily B2B: manufacturers shipping to distributors, distributors shipping to retailers. E-commerce introduced a massive B2C component — individual packages delivered to individual consumers at individual addresses.

Delhivery's founding story illustrates this shift. The company was founded in 2011 and initially built its network almost entirely around Flipkart's logistics requirements, effectively functioning as Flipkart's outsourced last-mile delivery arm in large parts of India. As Flipkart's volumes grew, so did Delhivery's network. Over time, the company built sufficient geographic coverage and hub infrastructure to diversify its revenue base — onboarding other e-commerce companies, D2C brands, and eventually mid-market SME shippers. By the time of its IPO on the NSE in 2022, Delhivery had evolved from a single-client dependent logistics operator into a multi-segment network with express parcel, PTL freight, supply chain services, and cross-border operations. The dependency on any single large customer had reduced materially from the earlier phase.

The e-commerce logistics segment was characterised by intense competition, low switching costs for merchants, significant infrastructure capex requirements to build coverage, and pricing pressure as large platforms internalised logistics (Ekart for Flipkart/Meesho, Amazon Logistics for Amazon). The economics of scale — the point at which density of shipments per route makes last-mile delivery consistently profitable — was a key analytical threshold that investors tracked closely.

Multimodal logistics and the Dedicated Freight Corridor

India's freight transport has historically been heavily road-dominated, with road carrying approximately 60–65% of freight by value, rail around 30%, and coastal/inland waterways the remainder. This balance was economically suboptimal: rail is inherently lower-cost per tonne-km than road for bulk freight, but India's rail freight network suffered from the fundamental problem that passenger and freight trains shared the same tracks. Freight trains were chronically delayed by the priority given to passenger services, making rail unreliable for time-sensitive cargo.

The Dedicated Freight Corridor (DFC)programme was the government's attempt to address this structurally. The Western DFC — running from Jawaharlal Nehru Port Trust (JNPT) near Mumbai to Dadri near Delhi — and the Eastern DFC — running from Ludhiana to Dankuni near Kolkata — were designed as exclusive freight-only rail lines capable of carrying heavy, double-stack container trains at speeds of 75–100 km/h, significantly faster than freight on the shared network. Sections of the Eastern DFC were opened for commercial traffic from 2020 onward; the Western DFC saw progressive commissioning through the early 2020s.

The economic implications for logistics were significant. A reliable, fast freight-only rail corridor would reduce transit costs for containerised freight on the Delhi-Mumbai corridor — one of India's most congested freight routes — materially compared to road. Container Corporation of India (Concor) was positioned as a key beneficiary given its dominance in containerised rail freight. Industrial parks and warehousing hubs located near DFC corridor access points attracted investment premiums from logistics developers.

National Logistics Policy and PM Gati Shakti

In September 2022, the Government of India formally released the National Logistics Policy (NLP), which articulated the government's target of reducing logistics costs from the then-prevailing 13–14% of GDP to levels comparable to global benchmarks over the subsequent several years. The NLP framed this goal around four pillars: integrated digital logistics systems, standardisation of physical infrastructure, service improvement across sectors, and human resource development.

The NLP was closely linked to the broader PM Gati Shakti National Master Plan, launched in 2021, which aimed to create a geospatial planning platform integrating the infrastructure investment plans of all central ministries and state governments. The intent was to avoid the historical pattern of disconnected infrastructure investments — a highway that terminates before connecting to the rail junction, or a port that lacks adequate road access. By mapping all planned investments on a shared platform, the government aimed to identify bottlenecks and prioritise multi-modal connectivity improvements.

For listed logistics companies, these policy initiatives were viewed as long-term structural tailwinds rather than immediate revenue drivers. The reduction in logistics costs, if achieved, would benefit the broader economy but would also pressure the margins of companies whose competitive advantage depended on information asymmetry or inefficiency in the legacy system. Well-run, technology-enabled logistics companies were generally seen as better positioned to benefit from formalisation and infrastructure improvement than fragmented, informal operators.

Nifty 500 companies in this sector

The Nifty 500 universe includes several listed logistics companies across different segments of the value chain. Explore their individual financial profiles, metrics, and historical data in the logistics stocks section of our stocks directory. Notable listed names that were part of the broader Indian logistics landscape included Delhivery (express parcel and freight), Blue Dart Express (premium express, DHL subsidiary), TCI Express (surface express), VRL Logistics (asset-heavy surface express), Allcargo Logistics (multimodal and 3PL), Container Corporation of India (rail containerised freight), and Mahindra Logistics (3PL and mobility solutions).

For context on how to analyse asset-light businesses and evaluate operating leverage, see our P/E ratio explainer and the broader fundamentals section of the Education Hub.

This primer is educational only and does not constitute investment advice, a recommendation to buy or sell any security, or research under SEBI (Research Analysts) Regulations, 2014. All historical figures and examples are illustrative and reflect past conditions; past performance is not indicative of future results. Logistics businesses carry operating, regulatory, and competitive risks. Please consult a SEBI-registered investment adviser before making any investment decision.