Rationale
While assigning the rating, ICRA has taken a consolidated view of Blue Dart Express Limited (BDEL) with Blue Dart Aviation Limited (BDAL) and Concorde Air Logistics Limited (both 100% subsidiary of BDEL).

The ratings reaffirmation continues to factor in the leadership position of BDEL in the domestic air express segment, its expanding ground express segment, strong control over operations supported by dedicated ground and air infrastructure and the state-of-the-art technology backbone ensuring high service standards. The ratings also factor in the financial support from the Deutsche Post DHL (DPDHL) Group (ultimate parent - Deutsche Post AG; rated A3 (Stable) by Moody's) to BDEL, should the need arise. To support the credit profile, DHL Logistics Private Limited provided short-term lending to BDAL for refinancing its high-cost debt in FY2021. The rating also considers the strong operational linkages with international freight carriers, being a part of the DPDHL network, helping the company optimise its freight distribution operations globally. The rating also takes into account the company's improved performance in FY2021 and H1 FY2022 due to higher-than-expected revival of the economy post the lockdown in Q1 FY2021. Despite the pandemic impacting the business in H1 FY2021, the company reported a revenue growth of 3.6% in FY2021 on a YoY basis. The company also reported improved operating margins of 21.2% in FY2021 against 15.6% in FY2020 owing to reduction of network cost, yield increase and various cost efficiency measures undertaken in FY2021. It already reported Rs. 1989.8 crore in H1 FY2022 due to pent up demand and firm freight rates. Despite rising fuel prices, the operating margins remained healthy at 21.8% in H1 FY2022 with continuation of cost control measures and its ability to successfully pass on the high fuel prices to the customers. However, demand remains sensitive to further waves or new virus variants with the sector's large dependance on economic activities and remains a key rating monitorable.

The long-term rating, however, continues to be constrained by the capital-intensive nature of the air express and the susceptibility of profit margins to domestic economic activity, apart from the intensely competitive landscape. The linkage to economic activity is reflected by disruption in business profile in H1 FY2021 due to the pandemic. The company has focussed on growing the highly fragmented ground express segment over the last few years. Further, technology usage has reduced the traditional mail requirements across various industries, especially in the banking, financial services and insurance (BFSI) segment. The technology-led disruptions will continue to test the business models in the express cargo industry. BDEL's ability to innovate and meet the evolving customer requirements will remain crucial over the long -term. The company has a high operating leverage and hence healthy growth in shipments is critical for sustenance of its operating profit margins.

ICRA's Stable outlook factors in the company's established position in the market, strong customer base and its healthy financial profile.