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Logistics Industry in India; Opportunities & Challenges

Logistics Industry in India; Opportunities & Challenges 1
Logistics Industry in India; Opportunities & Challenges 1

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Contents

Contents

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Executive Summary

India is one of the fastest growing economies of the world today. This growth is fuelled by growth in infrastructure, booming manufacturing sector, EXIM trade, retail and agricultural related activities amongst others. This, in turn, has resulted in increased demand for world- class logistics and warehousing services in India, leading to the growth and transformation of this sector. The logistics sector has been growing at an impressive CAGR of 8 per cent. The industry has been valued at USD 125 billion in 2010 and is expected to continue this growth for the next 3-5 years. With rising disposable income, changing lifestyle, focus of government and private sector logistics has received special attention in the past two to three years. Development of cold chain / warehousing infrastructure, thus, remains at the core of the government’s plan to enable growth of the logistics sector. Further, the government is strengthening the infrastructure with over US $70 billion of investment planned till 2012. Logistics will be one sector which will be the backbone of flourishing trade activity and infrastructure development, and will receive special attention by the government / private sector in coming years. The accelerated growth of the logistics industry, coupled with emerging trends of 3PL services, logistic parks, cold chain and warehousing activities, has made India a vast and untapped market.

For most domestic players logistics has for long been restricted to the basic transportation of goods. Warehousing has grown to some extent but other services are still at a nascent stage. With increasing demand (from both MNCs and Indian companies) and growing requirements, the Indian logistics industry has expanded its bouquet of services to courier, cold chain, container freight, 3PL etc. with greater emphasis being laid on value-added services, such as packaging, labelling, bar coding and reverse logistics. All these factors have led to the rapid growth of the organised warehousing industry in India. Growing at the rate of 30 per cent per annum, the 3PL industry is capturing the imagination of various logistics players, both domestic as well as international. Over the next five years, approximately 110 logistics parks and 45 million square feet of warehousing space is expected to be developed across the country by various logistics companies. Despite the impressive growth rates, the logistics sector in India is fraught with many inefficiencies. Logistics cost in India is fairly high – at around 13 per cent of GDP, which is much higher than that in USA (9%), Europe

Contents Contents ...................................................................................................................................... 2 Executive Summary India is one of the fastest growing economies of the

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(10 %) and Japan (11%). These inefficiencies of the Indian logistics industry can be attributed to factors such as a complicated tax regime, fragmented market structure and inadequate infrastructure. It may be noted that although, lack of infrastructure acts as an inhibitor, but the dearth of adequate infrastructure also presents unique opportunities to players who are ready for the situation and understand the market. Infrastructure developments like the railway dedicated freight corridors, road development projects and modernisation of over 37 operational airports will increase India's handling capacities, thereby enhancing logistical performances. This report identifies such elements which are growth engines of the Indian logistics sector and focuses on understanding opportunities related within these elements.

The report begins with understanding of the industry and identification of strategic elements to logistics which are then studied in deep for each element to find market structure, growth drivers, barriers to entry, rules / government policies applicable to the market, competition threat and opportunities. Financials are discussed with possible scenarios and their financial / technical analysis, wherever required.

The report identifies ten such strategic growth areas of Indian logistics sector which includes:

  • 1. Air Cargo Logistics

2. Cold Chain / Cold Storage

  • 3. 4. Third Party Logistics

ICD / CFS

  • 5. Road Transport Service

6. Sea Ports

  • 7. Warehouse

8. Logistic Parks

  • 9. Relocation

10. Courier

The ten strategic elements, mentioned above, are analyzed in detail by understanding data of each sector collected through credible sources. This report is one step ahead in understanding the strategic elements of Indian logistics sector as it delves into each strategic element and identifies opportunities, rather than skimming over the logistics scenario by reporting facts,

figures and new developments. The report provides insights which can be used to understand the sector and directly assess investment opportunity in a particular sector. Today, the biggest challenge before the logistics industry is to increase efficiencies and become more cost- effective, thereby increasing India's overall cost arbitrage. The report also examines steps that can help India achieve that increased efficiency and ensure a more balanced and planned growth of the logistics sector.

(10 %) and Japan (11%). These inefficiencies of the Indian logistics industry can be attributed to

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Indian Logistics Industry

Indian Logistics Industry India is in midst of an unprecedented boom. Most industries are witnessing very

India is in midst of an unprecedented boom. Most industries are witnessing very strong growth rates and the economy is growing at above 8 percent. Healthy economic growth in India is increasingly supported by robust industrial growth. Both industrial and consumer goods are witnessing increased demand (refer figure 1a) and one of the relatively lesser known but significant sectors that support almost all industrial activity - the logistics sector - is also witnessing this growth as a follow through (refer figure 1b).

Indian Logistics Industry India is in midst of an unprecedented boom. Most industries are witnessing very

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Index of Growth of Industrial and Consumer Goods Production (Base = 100 in 1993-94) 267 251
Index of Growth of Industrial and Consumer Goods
Production (Base = 100 in 1993-94)
267
251
247
224
222
205
163 165
2001
2005
2006
2007
IIP
Consumer Goods

Figure 1a

Source: Share KPMG of Logistics cost in total sales for various industries % 15% 6% 5%
Source: Share KPMG of Logistics cost in total sales for various
industries %
15%
6%
5%
4%
4%
3%
3%

Figure 1b

Source: KPMG

Logistics is defined as the process of planning, implementing, and controlling the efficient,

cost effective flow and storage of raw materials, in-process inventory, finished goods and

related information from point of origin to point of consumption so as to meet customer

requirements. In layman's terms, it is all that goes into ensuring that the right material reaches

the right place at the right time. While logistics supports almost all industrial activity, it has

traditionally not been accorded attention as an independent sector in itself. An estimate of the

quantum of logistics spends (INR 90 trillion globally; INR 4 trillion in India), however

indicates the importance of this sector.

Index of Growth of Industrial and Consumer Goods Production (Base = 100 in 1993-94) 267 251

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The fast-paced growth in Indian economy is making it one of the preferred investment

destination for multinational corporations and a recognized manufacturing hub to the world.

This, in turn, has resulted in increased demand for world-class logistics and warehousing

services in India, leading to the growth and transformation of this sector.

Structure and size of Logistics Industry in India

The Logistics Industry in India has been valued at USD 125 billion in 2010.

Comprises around 13% of the country’s Gross Domestic Product.

It is expected to grow at a CAGR of ~ 8% over the next 3 to 5 years.

While the India logistics sector holds tremendous potential, it forms a very small portion of

the total global market for logistics at approximately 2 per cent of the estimated US$ 5,000

billion global logistics industry.

Despite the impressive growth rates, the logistics sector in India is fraught with many

inefficiencies. India's spend on logistics activities - equivalent to 13 percent of its GDP is

higher than that of the developed nations (refer table 1). The key reason for this is the

relatively higher level of inefficiencies in the system, with lower average trucking speeds,

higher turnaround time at ports and high cost of administrative delays being just a few of the

examples. According to a recent report by FICCI-Ernst & Young (E&Y), the average time

taken to clear import and export cargo at ports is about 19 days in India, against three to four

days in Singapore. As compared to the European countries, rail transportation in India is

almost 3.5 times more expensive and the average transit time by road is three times higher.

Country

Logistics Cost/ GDP

Share of 3PL in overall logistics

China, India

13-15%

<10%

U.S.

9.9%

57%

Europe

10%

30-40%

Japan

11.4%

80%

Table 1 Source: Logistics in India, SSKI

These inefficiencies have arisen over the years from a combination of a non-conducive policy

environment, extensive industry fragmentation and lack of good basic infrastructure. India's

indirect tax regime discouraged large centralized warehouses and led, over time, to

fragmentation in the warehousing sector. At the same time, the absence of a single logistics

'champion' (whether in form of a ministry or otherwise) in the government (or industry) led to

a disintegrated approach to development of the sector. Extensive fragmentation meant the

incapacity of industry players to develop the industry as a whole and poor support

infrastructure, such as roads, ports and telecom, led to a situation where the opportunity to

create value is limited.

However, much of this is changing with the government now demonstrating a strong

commitment towards providing an enabling infrastructure and creating conducive

The fast-paced growth in Indian economy is making it one of the preferred investment destination for

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regulations. There is significant current and planned investment in infrastructure to the tune

of (INR 15 trillion) over the next few years and an increased emphasis on public-private

partnership. At the same time, regulations around rationalization of tax structures and

prevention of overloading for example, are creating an environment of positive change.

Players now have the opportunity to leverage economies of scale, complemented with better

infrastructure, to provide integrated logistics solutions which are cost effective.

Evolution of the global logistics industry

Globalization, consolidation, technology advancements and outsourcing have led to growth

in the logistics services market. The capabilities of logistics service providers are growing

along with the changing expectations of their clients. As the logistics services industry

evolves, competitors are moving away from asset-based commoditized services to more

strategic, information-based approaches.

Customers are demanding a “single point of contact” for all logistics services and are looking

for “one-stop logistics shopping” unable to cope with complexities across their supply chains.

The models in logistics industry have accordingly evolved over time to address the changing

needs of the market and vary based on scope of service offerings, degree of collaboration,

levels of asset intensity and IT capabilities across the supply chain. The logistics model has

been evolving from a specialized function to fourth party Logistics (4PL) and fifth Party

Logistics (5PL) companies .

regulations. There is significant current and planned investment in infrastructure to the tune of (INR 15

First and Second Party Logistics handle all logistics functions, such as trucking and

warehousing, which face low returns and high levels of asset intensity but low barriers to

entry. With the increasing need for “one-stop solutions”, many 2PL have evolved into 3PL by

regulations. There is significant current and planned investment in infrastructure to the tune of (INR 15

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adding new logistics capabilities and integrating their operations. They are asset light and

usually tend to have high returns; they contact most of their capacity needs to 2PLs. While

the 2PL puts in hard cash tangible asset, the 3PL puts in intellectual property.

Fourth party logistics is an integrator that assembles the resources, capabilities, and

technology of its own organization and other organizations to design, build and run

comprehensive supply chain solutions.

Evolution of Logistics in India

For most domestic players logistics has for long been restricted to the basic transportation of

goods. Traditionally, warehousing – which is an important constituent of the logistics sector –

has been dominated by small players with low capacities and poor deploying, handling,

stacking and monitoring technologies. India's archaic warehousing system was detrimental to

the growth of almost all sectors, especially sectors like food and food-processing that requires

modern warehouses and investments in cold chains and allied machinery. With increasing

demand (from both MNCs and Indian companies) and growing requirements, the Indian

logistics industry expanded its bouquet of services to include warehouse- related activities as

well. Interestingly, the role of a warehouse transformed – from a traditional storehouse to a

place where the inventory is efficiently managed, with greater emphasis being laid on value-

added services, such as packaging, labelling, bar coding and reverse logistics. All these

factors led to the rapid growth of the organised warehousing industry in India. Over the past

two decades the logistics sector in India, evolved from being a pure transportation /

warehousing functional service to provision of more value added offerings like customs

clearance, domestic / international freight forwarding, cross-docking, reverse logistics, freight

consolidation, warehousing of modern standards etc.

Over the next five years, approximately 110 logistics parks and 45 million square feet of

warehousing space is expected to be developed across the country by various logistics

companies. While there has been a growing recognition in India of logistics as a strategic tool

for enterprise cost reduction and improvement of organizational efficiency on the flip side

however, the logistics sector is characterized by dominance of a disorganized market.

Transporters with fleets smaller than five trucks account for over two-thirds of the total

trucks owned and operated in India and make up 80% of revenues. The freight forwarding

segment is also represented by thousands of small customs brokers and clearing &

forwarding agents, who cater to local cargo requirements.

In order to reduce logistics costs and focus on core competencies, Indian companies across

verticals are now increasingly seeking and using the services of third-party logistics service

providers. Traditionally LSPs (Logistics Service Providers) concentrated mainly on

transportation and logistics as they form a major share in logistics. However, in order to keep

up with rising demands and customer expectations, companies now also concentrate on value

added services like packaging, custom clearance, inventory management and labeling.

adding new logistics capabilities and integrating their operations. They are asset light and usually tend to

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Elements of the Indian Logistics

The Logistics Industry in India is broadly categorized into :-

Air Freight

Rail Freight

Ocean Freight

Container Freight Stations/ Inland Container Depots

Storage & Warehousing

Cold Chain

Domestic Transportation

Courier

Third Party Logistics

Relocation

Clearing & Forwarding

Logistics Parks

Other Value – added services

Air Cargo & Airport Infrastructure

The use of air as the mode of choice for the movement of cargo has increased over the past

few years. While the amount of the cargo freighted via air is growing steadily, the

infrastructure related to air cargo handling and evacuation is not.The air freight segment

holds a small share of India's freight market. At present India contributes over 1% of the

world air cargo traffic. The five major airports (Mumbai, Delhi, Kolkata, Chennai and

Bangalore) account for around 88% of the total air cargo handled in India. Growth in cargo /

freight volumes is an outcome of macroeconomic factors such as domestic consumption,

exports and imports. Infrastructure remains a major challenge. The international and domestic

cargo volumes (except for the F.Y 2008-09) have shown a steady growth despite inadequate

capacity and infrastructure constrains. The blip in 2008-09 can be accounted due to the global

slowdown. Passenger and Cargo movement is expected to be at 124 million and around 2

million tonnes respectively in 2009-10, which is expected to grow at 15% and 10%

respectively in FY11.

Elements of the Indian Logistics The Logistics Industry in India is broadly categorized into :- Air

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Airport is less attractive than Power, Roads and Ports due to the following reasons: Investment opportunities

Airport is less attractive than Power, Roads and Ports due to the following reasons:

Investment opportunities in airport infrastructure for private players is significantly lower due

to fewer ongoing projects.

Limited push from Government – There has been limited push to attract private participants

after few major metro airports were awarded to private players. The Airports Authority of

India (AAI), which is responsible for the development and modernisation of airports in India,

has been undertaking modernisation of 35 non-metro and two metro airports on its own.

Airport projects plagued by high gestation period due to delays in receiving environmental

clearances – In the airport infrastructure sector, greenfield airport projects have seen delays

on account of significant time taken in obtaining clearances from the environmental ministry,

pollution board and defence ministry. Also, there are delays in land acquisition for aero and

non-aero activities.

Airport is less attractive than Power, Roads and Ports due to the following reasons: Investment opportunities

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Timelines for Clearances and project execution (in months) Airports Ports Power Roads 60 60 60 39
Timelines for Clearances and project execution
(in months)
Airports
Ports
Power
Roads
60
60
60
39
39
30
30
30
30
30
21
10
Environmental
clearance + Land
acquisition issues +
Financial closure
Project Execution
Gestation period

Source: Crisil research

Crisil research estimated an investment of USD 440 billion in next five years by private

players. This relates to four green field projects in Navi Mumbai, Greater Noida, Pune and

Goa.

Timelines for Clearances and project execution (in months) Airports Ports Power Roads 60 60 60 39

India has a great potential for becoming a possible cargo hub for SAARC and ASEAN

countries and its strategic location as a transit destination connecting the eastern- western

global corridors. The Civil Aviation ministry has identified Nagpur as India’s national cargo

hub and has promised an aviation policy for providing significant concessions for air

freighter operations out of Nagpur. Airport Economic Regulatory Authority (AERA) set up in

Timelines for Clearances and project execution (in months) Airports Ports Power Roads 60 60 60 39

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2009 for regulation of the sector is yet to provide direction on certain key matters such as

determining tariff structure, performance standards, etc.

Railways

Indian Railways (IR) serves as the backbone of India’s transport infrastructure, and as such

contributes significantly to macroeconomic growth and global competitiveness. The premier

transport organization of the country is the largest rail network in Asia and the

world’s second largest under one management at a total of 63,332 route kms. Freight

contributes to around 65% of its total revenue.

The existing railway network is crippled by capacity constraints and is inadequate to meet the

potential demand of cargo transportation. The ambitious project of railway freight corridor

should address the capacity constraint. The work for the dedicated freight corridor (DFC)

( which has been renamed as Diamond Freight Corridor in the recent Rail Budget) , envisages

construction of dedicated freight lines along the eastern and western sides of India covering

2,739 km . Once commissioned, the DFC along with the feeder routes will ensure the

availability of sufficient capacity in the face of rising demand. It is expected to increase

average speeds to over 100 kmph, reduce transit time by half and also reduce the cost of

operations. The project is expected to reach completion by 2016-17. Dominated by

CONCOR, the rail container policy announced in January 2006 allowed private companies to

undertake container transportation by rail. As many as 16 licenses have been issued for

operating container trains.

Ports/Shipping

Ports provide an interface between the ocean transport and land-based transport. India’s port

infrastructure constitutes of 12 major ports (Kandla, Mumbai, Jawaharlal Nehru, Mormugoa,

New Mangalore, Cochin, Tuticorin, Chennai, Ennore, Vishakhapatnam (Vizag), Paradip and

Kolkata including Haldia and around 187 non-major ports. Of the non-major ports, only

around 48 are operational; rest are only fishing harbors.

Lack of proper facilities, deeper drafts, good connectivity and necessary equipment /

technology has contributed to high logistics costs. At present, a lot of time is wasted because

of pre-berthing delays. The average turnaround time of vessels at major Indian ports ranges

from 1.77 days to 4.82 days. Port development is further bogged down by the need for getting

multiple clearances. Multiple agencies are involved in granting approvals to port projects.

These involve project appraisal by the Planning Commission, Law Ministry, and Ministry of

Finance. This preliminary process of consultation among

inter-ministerial groups, prior to Cabinet approval is inherently time consuming. To add to

the concern, the National Maritime Development Programme (NMDP) is progressing at a

slow pace with many project delays and cost escalations. So far, only 41 of the total 253 port

projects and 5 of the 111 shipping projects have been completed. Other issues facing Indian

ports relate to port security, and land acquisition particularly for non-major ports. Also, port

projects typically suffer from delay in environmental clearances, which on an average take

2009 for regulation of the sector is yet to provide direction on certain key matters such

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approximately a year and a half for each project. Going forward, these issues will need to be

addressed on a proactive basis.

On the positive side, with the Government encouraging private participation in port

development, non-major ports have begun contributing significantly to the economy. The

relative share of non-major ports has grown from 26 per cent to 28 per cent in the four years

since 2004-05. While the total capacity of non-major ports in 2008-09 is estimated at 228.3

Million MT, the corresponding total cargo handled was 220 Million MT.

Container Freight Station (CFS) / Inland Container Depots (ICD)

The CFS / ICD Industry was estimated to be at INR 36 billion in 2008-09, with the share of

CFS and ICD segments at INR 26 billion and INR 10 billion, respectively. It is expected to

grow at 11.7 % p.a. from 2008-09 to 2013-14 and be around INR 63 billion in 2013-14.

approximately a year and a half for each project. Going forward, these issues will need to

This growth is largely driven by growth in international trade :-

Import traffic has grown at a significant CAGR of 22 per cent over the past 10 years until

2008-09, with accelerated growth in the past 5 years (CAGR of 29 per cent). Exports have

also grown at a healthy CAGR of 19 per cent over the last 10 years, of which the past 5 years

have witnessed a stronger CAGR of 21 per cent.

Import and export traffic growth declined to 12.9 and 2.4 per cent (in dollar terms) in 2008-

09 as compared to 35 and 29 per cent, respectively in 2007-08 due to a fall in demand.

However, growth, in import and export traffic, was higher at around 29 and 17 per cent (in

rupee terms) as compared to 21 and 14 per cent in 2007-08 due to strengthening of the dollar.

The growing EXIM trade, backed by an economic growth of 8.48 per cent per annum over

the last 5 years (2003-04 to 2008-09), is driving container traffic at major ports in the

country.

approximately a year and a half for each project. Going forward, these issues will need to

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Goods such as garments, auto components, electronic goods, cotton yarn, marble, granite, jute and leather products

Goods such as garments, auto components, electronic goods, cotton yarn, marble, granite,

jute and leather products require careful handling. Hence, they are increasingly favouring

containers for transportation. As a result, container traffic growth has been higher as

compared to other cargo categories. Revenues from handling & transportation and ground

rent were 78% and 18% respectively of the total revenues in 2008-09.

Some of the large players are:

Gateway Distriparks Ltd (Revenue - INR 2 billion in FY09);

Allcargo Global Logistics Ltd (Revenue - INR 5.2 billion in year ended Dec 08);

Sanco Trans Ltd. (Revenue - INR 617 million in FY09).

Warehousing

The Warehousing Industry was estimated to be at INR 200 billion in 2008-09, having grown

at a CAGR of 8 -10 % p.a. over the year period from 2004-05 to 2008-09. It is expected to

grow at 9 % p.a. from 2008-09 to 2013-14 and be around INR 300 billion in 2013-14.

Goods such as garments, auto components, electronic goods, cotton yarn, marble, granite, jute and leather products

Industrial warehousing and agricultural warehousing have grown at the rate of 9 -11 % and

3.5 - 4.5 % p.a., respectively. However, the organised sector is expected to grow at 15-17%

vis-à-vis the unorganised sector which would grow at 8-9%.

Goods such as garments, auto components, electronic goods, cotton yarn, marble, granite, jute and leather products

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Growth drivers would be high penetration of organised retail (CAGR of 29% over 5 years)

and introduction of a new indirect tax regime under GST which will encourage construction

of large warehouses at key strategic locations. Other sectors likely to fuel demand for

warehousing include consumer durables, FMCG, IT hardware, automobiles, pharmaceuticals

etc.

Some of the large players are:

Central Warehousing Corporation (Revenue of INR 7 billion);

Om Logistics Ltd. (INR 2.7 billion);

Aegis Logistics Ltd. (INR 3.7 billion).

Cold chain

Cold chains form an integral part of the supply chain for storage and distribution of

perishable goods and temperature sensitive pharmaceuticals and biological preparations.The

Cold chain Industry was estimated to be at INR 88 billion in 2008-09, having grown at a

CAGR of ~ 18% over 5 years. The industry is broadly categorised under Temperature

Controlled Warehouse (TCW) and Temperature Controlled Vehicles (TCV) segments which

were estimated to be at INR 85 billion and INR 3 billion respectively.

Market Size as of March 2009

Cold chain industry ( Rs 84.5-88.0 billion) TCW segment ( Rs 82-85 billion) TCV segment (
Cold chain industry
( Rs 84.5-88.0 billion)
TCW segment
( Rs 82-85 billion)
TCV segment
( Rs 2.5-3 billion)

TCV – Temperature-controlled vehicles

TCW – Temperature-controlled warehouses

Source: CRISIL Research

Capacity - TCW has grown at a CAGR of around 7% from 2005-06 to 2008-09 to reach 23.3

million tonnes (5,400 facilities) in 2008-09. It is expected to grow at a compounded rate of

10.5 per cent, to post revenues of Rs 138 billion by 2013-14.

Growth drivers would be high penetration of organised retail (CAGR of 29% over 5 years) and

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As per the planning commission estimates, there are presently around 4,762 cold storage units in India

As per the planning commission estimates, there are presently around 4,762 cold storage

units in India with a capacity of 196 lakh tonnes, with potato constituting almost 81 percent

of the total capacity of cold storages being handled.

India may be among one of the world’s leading producers of horticulture products but more

than half the fruits and vegetable produce end up rotting as waste, even before it arrives in the

market for sale. Poor post-harvest methods of warehousing, storage and unsafe transportation

from point of production to point of sale are among most prominent causes of this avoidable

value drain. The key issues in the Agri-logistics related to the development of the cold chain

industry are of non-standard pricing, limited financial capabilities of the transporters,

opportunistic profiteering, lack of scientific handling of produce and consequent high prices

and limited choices for the consumers.

Growth drivers would be high growth in the organised retail, food processing and food

service industries, tax benefits and investment linked subsidy, which is expected to boost

investments in the sector. Over the past 3 years, while the organised retail sector has grown at

a rate of 28 per cent, the food processing and food service industries have also grown at a

healthy rate. The Union Budget for 2009-10 has proposed that all capital expenditure other

than that pertaining to land, goodwill and financing expenditure to build and operate cold

storage facilities, can be fully treated as deductions for tax. This is expected to further boost

investments in the sector. Currently, cold chain operators are eligible for a subsidy (25 per

cent of the project cost, not exceeding Rs 5 million per project). The Income Tax Act also

allows several exemptions and deductions which are profit-linked. These deductions will

provide incentives to large corporates to invest in the cold chain sector as they will get a

complete deduction of tax for their capital expenditure in addition to the subsidy received

from the National Bank for Agriculture and Rural Development Capital (NABARD).

Further, large scale integrated logistics parks will also increase the supply of temperature-

controlled warehousing space.

Some of the industry and government initiatives for development of cold chain infrastructure

include :-

Container Corporation of India (CONCOR) is moving into cold chain logistics in a big way

and is developing a cold supply chain business in the form of suitable logistics infrastructure

as well as state-of-the art storage facilities to sell fresh fruits and vegetables in the global

food market.

As per the planning commission estimates, there are presently around 4,762 cold storage units in India

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With a view to increase share of processed food in the country to 20% from the present 6%,

the government is setting up 30 food parks by 2012 under public-private partnership. These

food parks will have cold warehousing, grading centers and research laboratories. These

parks could also be given SEZ and other fiscal benefits to reduce production cost and

increasing competitiveness. Considering the high risks involved in the food processing sector,

the government will provide a subsidy of Rs 50 crore per park to private investors.

The government plans to establish 50 cold chain networks, including refrigerated vans all

over the country, which will help the farmers enhance the shelf-life of their produce and

retain their quality. In addition, investment-linked incentives have been introduced for setting

up and operating cold chain facilities, warehousing.

The Agricultural and Processed Food Products Export Development Authority (APEDA) has

established six Centres for Perishable Cargo at Bangalore, New Delhi, Chennai,

Thiruvananthapuram, Hyderabad, and Mumbai of varying capacities. The total handling

capacity at these six CPCs is 2.16 lakh tonnes per annum. The operating and ground handling

agencies have been designated for each CPC. In addition, APEDA has signed MoUs for

setting up of CPCs at Cochin, Ahmedabad, Amritsar, Kolkata, Bogdogra, Lucknow, and Goa.

In the recent past private players have entered into the business of refrigerated transportation

by rail and refrigerated warehouses for perishable cargo near airports. Inadequate and erratic

power supply continues to remain a major concern for the growth of the industry. Based on

the interaction with industry players, it is to be noted that some players have deferred their

expansion plans due to erratic power supply at the planned location.

Some of the large players are:

Snowman Frozen Foods Ltd. (INR 348 million);

Western Farm Fresh Farms Pvt. Ltd. (INR 53 million);

Deb Bhumi Cold Chain Pvt. Ltd. (INR 50 million).

Domestic Freight Transportation (DFT)

The Domestic Freight Transportation industry is classified on the basis of transportation

modes, segmentation of markets, types of operators and operations and kinds of haulage

prevailing in the industry. DFT service largely denotes transportation of goods within India

and

excludes

international

transportation

services.

With a view to increase share of processed food in the country to 20% from the

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The DFT Industry was estimated to be at INR 1,932 billion in 2008-09, having grown at

The DFT Industry was estimated to be at INR 1,932 billion in 2008-09, having grown at a

CAGR of 8 -10 % p.a. over the 5 year period from 2004-05 to 2008-09. It is expected to

grow at 11-12 % p.a. from 2008-09 to 2013-14 and be around INR 3,386 billion in 2013-14.

Total freight movement in billion tonne kilometers (BTKM) is expected to grow at a CAGR

of 7-8% to 2,153 BTKM in 2013-14.

Growth in primary freight movement is largely driven by industrial and agricultural

production alongwith non-oil imports. Secondary freight movement is driven by private final

consumption expenditure and industrial production.In this report, the focus will be primarily

on the Road Freight Transportation Segment.

The DFT Industry was estimated to be at INR 1,932 billion in 2008-09, having grown at

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Porter’s five forces model for Road freight transportation sector

Porter’s five forces model for Road freight transportation sector India has the second largest road network

India has the second largest road network in the world stretching 3.3 million kilometers in

length. In India, national highways, aggregrating a length of close to 67,000 Km, constitutes

a mere 2 percent of the road network but carries about 40 percent of the total road traffic.

Road transport has a 53% share in goods transport in India, followed by Rail with 36% share.

The Road Freight is equipped with many inefficiencies. The challenges include land

acquisition, encroachment on highways, environmental and forest clearances, shifting of

utilities, railway approvals for rail overbridges, local law and order problems, poor

performance by some contractors, etc. This translates in form of slower speeds of vehicular

traffic. On an average, the kilometer range per Commercial Vehicle per day in India is 240-

280, as against 680-700 in the developed countries.

Roads occupy a crucial position in the growth and development of the transportation

industry. Hence, the government has undertaken several projects to expand the road network

nationwide for providing connectivity and mobility in both the rural and urban areas. The

golden quadrilateral project and east-west and north-south corridors (connecting four major

metros) are examples of such initiatives.

In the Eleventh five-year plan, the planning commission has decided to make an investment

of Rs 3,141.5 billion in the roads sector. The pattern of funding for the 5 years is as stated

below:

Projected investment in roads sector (Rs billion)

 

Year

Public

Private

Porter’s five forces model for Road freight transportation sector India has the second largest road network

19

2007-2008

358.5

159.7

2008-2009

376.0

171.9

2009-2010

395.6

196.4

2010-2011

432.3

251.4

2011-2012

511.2

288.5

Total

2,073.6

1,067.9

Share(%)

66.0

34.0

Source: Eleventh Five Year Plan

The Planning Commission anticipates the share of private sector to be around Rs 1,068

billion for the above plan.

Third Party Logistics

Third-party logistics (3PL) or logistics outsourcing is gaining importance as more and more

corporations across the world, unable to manage their complex supply chains, are

outsourcing logistics activities to the 3PL or logistics service providers. By outsourcing

logistics activities, corporations are able to not only concentrate on their core business

operations, but also achieve cost-efficiency and improve delivery performance and customer

satisfaction.

Third-party logistics (3PL) refers to outsourcing transportation, warehousing and other

logistics related activities to a 3PL service provider that were originally performed in-house.

More and more corporations across the world are outsourcing their logistics activities due to

various reasons, some of which are outlined below:

Due to globalisation, corporations across the world are increasingly sourcing, manufacturing

and distributing on a global scale making their supply chains very complex for them to

manage. Hence they have to outsource their logistics activities to experienced 3PL providers,

who have global operations.

Logistics outsourcing is used to complement the logistics activities the corporations do not

have competency in, and also to increase the geographic reach. When a corporation expands

business overseas, it may not be conversant with the customs duties, tax structures, rules and

regulations, import/export policies of the government, and culture of the foreign country. A

3PL provider, who has long been operating in that country, will be better able to carry out the

logistics operations.

Logistics may not be one of the core activities of a corporation. So, inefficiency may creep in

if it is looked upon as a secondary activity. Since the 3PL providers are now offering a

number of value-added services such as customs clearance, freight forwarding, import/export

management, distribution, after sales support, reverse logistics and so on, corporations can

outsource all these activities, and concentrate on their core business operations.

Logistics outsourcing may also reduce costs as the 3PL providers can get the advantage of

the economies of scale, which is otherwise not available to the corporations.

By outsourcing logistics, corporations can reduce their asset base, and deploy the capital

released for other productive usage.

2007-2008 358.5 159.7 2008-2009 376.0 171.9 2009-2010 395.6 196.4 2010-2011 432.3 251.4 2011-2012 511.2 288.5 Total

20

Logistics outsourcing improves cycle time and delivery performance, thereby increasing

customer satisfaction.

Third party logistics (3PL) in India is still in a relatively nascent stage. 3PL is one of the

fastest growing segments within Logistics with 55 percent of Indian companies outsourcing

logistics services such as supply chain management and warehousing. 3PL is estimated to

grow at about 30% annually and become a US$ 30 billion industry by 2010. It is expected to

constitute ~ 13% of the Indian Logistics market in FY11. The outsourcing of third-party

logistics business (3PL) in the country is expected to touch $90 million by 2012. The end-

users of 3PL services include major players from the retail, auto components and the

electronics industry.

The organised 3PL market in India can be categorised into three major segments – public

sector, private sector and foreign entrants. Some of the major players in each category are:

Public Sector – Transport Corporation of India, Container Corporation of India, Food

Corporation of India and Central Warehouse Corporation

Private Sector – Gati, Allcargo, Safexpress and Reliance Logistics

Foreign Entrants – DHL, Fed Ex, Blue Dart and TNT

Relocation

Relocating things are on the move in the Indian corporate world. Companies today have

branches all over the country and abroad and keep sending their employees on assignment to

various locations. This has given rise to a new professional corporate relocation services

companies. Relocation was hitherto a HR function, and most companies restricted their role

in the relocation process to handing over a lump sum to their employees and letting them do

it on their own. But there has been a change in attitude of late, mainly because of the growing

realization of the delays and costs involved in the settling-in process.

The corporate relocation services industry has also been given a boost by the growing

number of expats coming to India, attracted by the boom in the IT, pharmaceuticals and other

industries. The new relocation companies offer services that range from cultural orientation,

finding homes, school admissions for children, arranging domestic help etc.

Corporate relocation services companies also help offices move to new locations. Services

include moving, complete office installation including reconfiguration of office equipment,

etc. Some companies go further and familiarize staff with a new city, conduct language

training courses etc.

It certainly is a booming industry, with international names making their presence felt. It's

worth several hundred crores today, and with double-digit growth rates, the corporate

relocation industry could reach stratospheric levels. Currently, this industry is dominated by

many small players.

Some of the big players include:

Agarwal Packers & Movers;

Santa Fe (through Ikon and IR moving services)

Logistics outsourcing improves cycle time and delivery performance, thereby increasing customer satisfaction. Third party logistics (3PL)

21

PN Relocation

Logistics Parks

The concept of a consolidated logistics centre can be traced back to the Foreign Trade Policy

of 2004, which led to the development of Free Trade Warehouse Zones (FTWZ). While

FTWZ were aimed at facilitating import and export of goods, the need for a one-stop shop

that could additionally cater to the domestic market led to the development of logistics parks

as a part of the infrastructure industry in 2005-06.

Logistics Park is a designated area that facilitates domestic and foreign trade by providing

services like warehousing, cold storage, multi-modal transport, container freight station, etc.

This area also acts as a place where a company can unload cargo for distribution,

redistribution, packaging and repackaging.

Majority of these parks will be developed in the proximity of established and emerging

industrial hubs and SEZ’s in the country in order to tap their logistical needs. By 2012,

around 110 logistics parks, spread over approximately 3,500 acres, are expected to come up

across India at an estimated cost of US$ 1 billion. Service providers will benefit from 22%

tax exemption on income from continuous operations of 10 years.

Majority of the upcoming logistics parks are being planned in close proximity to state

capitals. However, availability of large land parcels at relatively low cost, connectivity to

multiple markets across states and proximity to industrial clusters has led to the emergence of

some tier-2 and tier-3 cities as favoured destinations for the development of logistics parks

and warehouses.

PN Relocation Logistics Parks The concept of a consolidated logistics centre can be traced back to

Courier

The Indian courier market is INR 70 billion is growing at 25% a year. Indian parcel courier

PN Relocation Logistics Parks The concept of a consolidated logistics centre can be traced back to

22

market is estimated to be in the tune of 4000 crores and it has witnessed an average yearly

growth of 25%.

Blue Dart (a listed company) is one of the key players with revenues of INR 9 billion crores.

Proposed postal bill is not in tandem with the best global practices and would adversely

impact the growth of trade and commerce in the country.

FDI and other regulatory norms

A snapshot of the FDI regulations governing the industry is as under:

100% FDI under the automatic route is permitted for all logistic services except services

mentioned in the points below.

FDI up to 100% subject to FIPB approval is permitted for courier services.

Airlines and Airport Infrastructure

FDI for existing airports 100% (FIPB approval for FDI beyond 74%)

100% FDI under automatic route for greenfield airports

49% FDI is permissible in domestic airlines under the automatic route, but not by foreign

airline companies

Recent Deals in the Logistics in India

PE firms are eyeing stakes in some of the bigger companies in the fast emerging logistics

sector to benefit from the fast growing story of this Indian industry.According to Merger

Market estimates, the logistics sector has witnessed increasing interest from the private equity

sector with US$ 780 million (5.5%), US$ 634 million (6%) and US$ 109 million (2.9%) in

2007, 2008 and 2009 respectively.

Recent deals in the Logistics Industry in India

 

Calend

US

Acquirer Name

Target Name

year

millioIn dustry

  • 1 Hitachi Transport System Ltd Flyjac Logistics Pvt Ltd

2010

5 5 Logistics company

  • 2 GVK Power & Infrastructure LBtdangalore International Airport Ltd2009

1 48Bangalore Airport Authority

  • 3 Blackstone Group Holdings LGLCateway Rail Freight Ltd

2009

6 5 Freight transportation company

  • 4 GVK Power & Infrastructure L tBdangalore International Airport Ltd2009 1 03Bangalore Airport Authority

  • 5 Eleventh Land Developers PvGt rLetadt Offshore

Ltd

2009

1 33Integrated offshore

oilfield servic

  • 6 Natural Power Ventures Pv t LGtdr eat

Offshore Ltd

2009

128 Integrated offshore oilfield servic

  • 7 India Value Fund

Innovative B2B Logistics Solutions2 0P0v9t L td4 0 Provider of rail container services

  • 8 3i India Private Infrastructure KFruisnhdn GapPatnam Port Company Ltd 2009

1 61Engineering and construction com

  • 9 Air India Indian (formerly Indian Airlines) 2007 3 ,000Airline operator

  • 10 Kingfisher Airlines Ltd 2007

United Brewerie s

1 03Charter

aviation company

  • 11 Kingfisher Airlines Ltd

United Brewerie s

2007

1 34Charter

aviation company

  • 12 Coeclerici Logistics S.p.A United Shippers Ltd 2007 8 1 Shipping company

  • 13 Jetlite (formerly known as

Jet airways India Ltd

Air Saha2ra0)07 3 38Airline operating company

  • 14 Nippon Express Co Ltd Nippon Express India Pvt Ltd 2007 8 Logistics company

  • 15 ARC India Ltd

T NT NV

2006

4 1 Provider

of surface transportation

  • 16 Jetlite (formerly known as

Jet airways India Ltd

Air Saha2ra0)06

5 00Airline operating company

Source: M erger Market

market is estimated to be in the tune of 4000 crores and it has witnessed an

23

Opportunities

The evolving business landscape and increasing competition across industries, is creating

the need for more efficient and reliable logistics services than what exists today. For

example, rapid growth of organized retail and the need to reach out to the large untapped

rural markets in India are necessitating development of strong back end and front end

supply networks. While the end user industries like auto, consumer durables, organized

retail, etc are direct triggers for the growth of the logistics sector in India, some of the

other drivers are described below:

Opportunities The evolving business landscape and increasing competition across industries, is creating the need for more

Rise of 3PL services - The logistics cost is a direct function of quality of the national

transportation infrastructure and professionalism of the logistics services offered. In

addition, the level of maturity of the logistics industry of a nation is co-related to the

share of 3PL service providers vis-à-vis the share of first and second party logistics

service providers. Many Indian companies are realizing the importance of their supply

chain network and are increasingly calling upon logistics managers for their professional

inputs into corporate and marketing strategies. Consequently there has been an uptrend in

Opportunities The evolving business landscape and increasing competition across industries, is creating the need for more

24

the requirement of specialized Third Party Logistics Service Providers to whom

companies are looking to outsource their logistics requirements. As per industry

estimates, it is expected that 3PL solutions in India would grow at a CAGR of more than

20% during the period 2009-15.

Investments in infrastructure - A well-knit and coordinated system of logistics

infrastructure plays an important role in the sustained economic growth of the country.

India’s infrastructure deficiencies have become more visible because of high growth

witnessed during the past few years. The most visible indicators of overstretched

infrastructure are India’s congested highways, airports and ports. Though the current

levels of efficiency are much below when compared with other developed nations, the

government has plans for improvement through infrastructure development. While

projects like development of the dedicated rail freight corridors, port development

projects under National Maritime Development Program are being envisaged and

executed at the national level, it is imperative that India augments its infrastructure

spending. Given the scale of work that is needed, presently it is still relatively low at

4.6% of GDP far behind China’s which is around 10% of GDP. The Planning

commission recommends a step-up in this ratio to 8% by 2011-12. The government has

also indicated that bottlenecks and delays in implementation of infrastructure projects

because of policies and procedures, especially in railways, power, highways, ports,

airports will be systematically removed. It is also expected that a large number of PPP

projects in different areas currently awaiting government approval would be cleared

expeditiously and the regulatory and legal framework for PPPs would be made more

investment friendly. Potential savings of up to $ 50 billion is expected with various

restructuring measures to bring cost of Indian logistics at par with its Global counterparts,

making Indian goods more competitive in the global market. Also emergence of SEZs,

EPUs and IT parks present exciting prospects. Distribution centers will be built in each

state to enable stock transfers and avoid inter-state taxes.

Recognition of logistics as an integral part of corporate strategy - Over the years, the

importance of distribution and logistics has become much more apparent to a broad range

of Indian companies. The significance of logistics within a company’s total business

structure is illustrated in the table below by using the inter-relationships of logistics with

other functions.

the requirement of specialized Third Party Logistics Service Providers to whom companies are looking to outsource

25

For the formulation of any competitive strategy, knowledge of key logistics elements is essential. Any factors

For the formulation of any competitive strategy, knowledge of key logistics elements is

essential. Any factors related to the procurement, storage and movement of goods must,

of necessity, be relevant to the determination of a company’s business. Accordingly there

has been a growing importance of the role and contribution that the logistics / distribution

manager makes to corporate strategic planning.

Streamlining of the indirect tax structure - In India, distribution network is designed more

by the tax consideration rather than the requirements of servicing customers at optimal

cost. Most of the consumer goods companies operate with at least one distribution center

or Clearing & Forwarding Agent (CFA) in each state, where they sell, to avoid inter-state

Central Sales Tax (CST). Such companies operated with 25 to 50 warehouses all over

India, which is a very high number compared to developed economies (less than 5) or

even China (less than 10). The introduction of Value Added Tax (VAT) and the proposed

introduction of a singular Goods and Services Tax (GST) are expected to significantly

reduce the number of warehouses, manufacturers are required to maintain in different

states, thereby resulting in a substantial increase in the demand for integrated logistics

solutions. Besides, manufacturers will be taking the advantage of taxes & incentives by

manufacturing in remote locations.

Globalizing of manufacturing systems- Globalization of manufacturing systems coupled

with advancements in technology is increasingly compelling companies across verticals

to concentrate on their core competencies and avail the cost saving potential of

outsourcing. This is expected to contribute to an increase in the need for integrated

logistics solutions, which is the niche of every third party logistics service provider.

Robust trade growth - Import traffic has grown at a significant CAGR of 22 per cent over

the past 10 years until 2008-09, with accelerated growth in the past 5 years (CAGR of 29

per cent). Exports have also grown at a healthy CAGR of 19 per cent over the last 10

years, of which the past 5 years have witnessed a stronger CAGR of 21 per cent. The

growing EXIM trade, backed by an economic growth of 8.48 per cent per annum over the

For the formulation of any competitive strategy, knowledge of key logistics elements is essential. Any factors

26

last 5 years (2003-04 to 2008-09), is driving container traffic at major ports in the

country. Robust growth in foreign trade will increase the demand for good quality and

timely logistics and warehouse services.

Inefficiencies in current supply chain system in India

Distribution and warehouses small and fragmented - The logistics and warehousing

sector in India, till now, has been highly fragmented and characterised by the presence of

numerous unorganised players. A large number of players have been providing services

in individual segments like transportation, warehousing, packaging etc.

Minimal Inter modal transfers

Value added logistics players scattered

Logistics spend around 10.7 per cent of the GDP in 2008-09, which is significantly

higher than the 5 to 7 per cent across developed nations. The higher spend is largely due

to inefficient logistics operations, multiple tax structures, inadequate logistics

infrastructure and unorganised nature of the industry.

Profile of Key Players

Gateway Distriparks Ltd

last 5 years (2003-04 to 2008-09), is driving container traffic at major ports in the country.

27

GDL is in the business of owning, developing and managing Container Freight Stations

(CFS) and Inland Container Depots (ICD). The company operates container freight

stations (CFS) at Navi Mumbai, Chennai, Vishakapatnam and Inland Container Depot at

Garhi Harsaru. GDL is in the process of expanding capacity at its existing CFSs and

setting up a new CFS at Kochi. Shares are listed on the National Stock Exchange and the

Bombay Stock Exchange.

Shareholding Pattern

GDL is in the business of owning, developing and managing Container Freight Stations (CFS) and Inland

Financial Performance

The Company’s income from operations & other income grew by 19% from Rs. 1,758.47

million in 2007-2008 to Rs.2,092.86 million in 2008-2009. The company maintained its

throughput at 247,618 Teus in 2008-09 (2007-08: 251,728 TEUs). The Profit before tax

increased from Rs.867.65 million in 2007-08 to Rs.1,073.24 million in 2008-09 after

providing for interest Rs.7.03 million (2007-08: Rs.0.62 million) and depreciation

Rs.149.53 million (2007-08: Rs.133.47 million).

Key Financial Indicators

GDL is in the business of owning, developing and managing Container Freight Stations (CFS) and Inland

28

All Cargo Global Logistics Ltd AGL is in the business of Container Freight Station/Inland Container Depot
All Cargo Global Logistics Ltd AGL is in the business of Container Freight Station/Inland Container Depot

All Cargo Global Logistics Ltd

AGL is in the business of Container Freight Station/Inland Container Depot (CFS/ICD),

Multimodal Transport Operations (MTO), Equipment Hiring, Oil Rig and Supply Vessel

Management Services. AGL currently operates three CFSs - at Jawaharlal Nehru Port

Trust (JNPT), Chennai and Mundra ports and an ICD at Pithampur near Indore. The

company has a widespread network covering over 5,000 destinations nationally and

internationally. AGL and Container Corporation of India have signed a joint venture for

establishment of an ICD at Dadri in which AGL will have a share of 51 per cent. In

February 2009, AGL entered a long-term agreement with M/s Hind Terminals Pvt Ltd for

setting up, commissioning, operating, managing and commercially running CFSs/ICDs at

Indore, Hyderabad, Nagpur, Bengaluru and at places mutually agreed by both parties.

Shareholding Pattern

All Cargo Global Logistics Ltd AGL is in the business of Container Freight Station/Inland Container Depot

29

Financial Performance The company has achieved a turnover of Rs. 5,167.56 million and earned a net

Financial Performance

The company has achieved a turnover of Rs. 5,167.56 million and earned a net profit of

Rs. 978.05 million as compared to turnover of Rs. 5,167.91 million and net profit of Rs.

926.73 million in preceding financial year, representing 5.54% growth in net profit.

EBITDA is Rs. 1,588.45 million as compared to Rs. 1,407.46 million in preceding

financial year, representating 12.86% growth.

Financial Performance The company has achieved a turnover of Rs. 5,167.56 million and earned a net
Financial Performance The company has achieved a turnover of Rs. 5,167.56 million and earned a net

30

Aegis Logistics Ltd. ALL is a leader in oil and gas logistics. The Group operates in

Aegis Logistics Ltd.

ALL is a leader in oil and gas logistics. The Group operates in two segments namely

Liquid Terminal Divisional and Gas Terminal Division. The Company’s subsidiaries

include Sea Lord Containers Limited, Konkan Storage Systems (Kochi) Private Limited,

Eastern India LPG Co. (Private) Limited and Aegis Group International Pte. Limited.

Shareholding Pattern

Aegis Logistics Ltd. ALL is a leader in oil and gas logistics. The Group operates in

Financial Performance

The Company earned gross profit before interest, depreciation and tax of Rs. 47.32 crores

during the financial year under review. Profits before tax stood at Rs. 36.88 crores. Net

profit after tax was Rs.30.38 crores.

Aegis Logistics Ltd. ALL is a leader in oil and gas logistics. The Group operates in

31

Gati Ltd Gati is one of the leading express distribution and supply chain solutions companies in
Gati Ltd Gati is one of the leading express distribution and supply chain solutions companies in

Gati Ltd

Gati Ltd Gati is one of the leading express distribution and supply chain solutions companies in

Gati is one of the leading express distribution and supply chain solutions companies in

India. Gati provides multi-modal transport services with connectivity across air, road,

ocean and rail.The company has overseas presence too with markets in the asia pacific

region and SAARC countries. The company has a large network spread over 603 of

India’s 611 districts and a fleet of over 4,000 vehicles on road. Shares listed on the

National Stock Exchange and the Bombay Stock Exchange. Company regained the

Consumer Superbrand Status for the year 2009-10. The road transport business of the

company provides both bulk and container services. It has a facility of online cargo

tracking, door-to-door pick up and delivery, documentation etc. Gati CTC launched its

sixth vessel MV-Gati Pride 7000 DWT and 441 TEU, which is its first custom-built

vessel. On March 31, 2009 Gati acquired the remaining 26.01 percent stake in Kausar

India, increasing its total stake to 99.73 percent.

Gati Ltd Gati is one of the leading express distribution and supply chain solutions companies in

32

Shareholding Pattern

Shareholding Pattern Financial Performance Operating income of the company grew by 12 percent in 2008-09 from

Financial Performance

Operating income of the company grew by 12 percent in 2008-09 from Rs 5.5 billion in

2007-08 to Rs 6.8 billion in 2008-09. The company registered a net loss of Rs 150.6

million during 2008-09 mainly on account of losses in freighter business and derivative

transactions. Besides, increase in interest costs and depreciation due to high capital

expenditure incurred by the company added to the net loss.

Key Financial Indicators

Shareholding Pattern Financial Performance Operating income of the company grew by 12 percent in 2008-09 from
Shareholding Pattern Financial Performance Operating income of the company grew by 12 percent in 2008-09 from

33

Blue Dart Express Ltd

South Asia's premier courier and integrated air express package distribution company.

DHL Express (Singapore) Pte. Ltd. acquired 81.03% of the equity capital of Blue Dart

Express Limited in 2005. Blue Dart continues to operate as an independent brand and

provides a complete spectrum of domestic and international express services through

synergies with DHL. Blue Dart has the most extensive domestic network covering over

25,416 locations, and service more than 220 countries and territories worldwide through

Sales alliance with DHL, the premier global brand name in express distribution services.

Headquartered in Mumbai, it has a workforce of over 6,947 people. The company has a

fleet of 5,408 vehicles and has air support of 3 Boeing 737 and 4 Boeing 757 freighters.

Financial Performance

The Company’s income from operations declined from Rs.979.42 Cr in 2007-2008 to

Rs.907.40 Cr in 2008-2009. The Net Worth of the company increased from Rs. 391.87 Cr

in 2007-2008 to Rs. 449.81 Cr in 2008-2009.

 

Unit

Dec-09

Dec-08

Operating

Rs Cr

907.40

979.42

Income

Capital employed

Rs Cr

23.76

23.76

Net Worth

Rs Cr

449.81

391.87

Total Debt

Rs Cr

0.0

0.0

Net Profit

Rs Cr

60.71

77.35

Operating

Percent

11.60

12.96

margins

Net margins

Percent

6.65

7.88

RoCE

Percent

20.96

29.63

RoNW

Percent

13.49

19.73

Current Ratio

Percent

2.21

2.16

EPS

Rs

25.58

32.60

Book value

Rs

189.57

165.15

Conclusion

Blue Dart Express Ltd South Asia's premier courier and integrated air express package distribution company. DHL

34

The logistics industry will continue to be the focal point of strategy formulation,

operational excellence and information technology to make maximum contribution in

value creation for customers. Globalization, consolidation, technology advancements and

outsourcing have only led to growth in the logistics services market and this industry will

continue to evolve in the coming years. Firms can enhance their market competitiveness

by reducing their logistics costs, thus lowering the total costs of goods and services. Any

impetus to improve the competitiveness of the firms at the national platform would

enable the nation to register a dynamic economic performance in a global environment.

USA has successfully reduced its logistics cost as a percentage of GDP from 17% in

1980 to its present level of 9.5 % by incorporating macro level reforms in the

transportation infrastructure coupled with micro level upgradation of logistics facility in

individual firms. India has therefore got a huge opportunity of reducing its national

logistics cost by studying and benefiting from other success stories. Indian logistics firms

will have a major role in achieving this cost reduction.

Government initiatives like development of SEZs, logistics parks, infrastructure building,

privatization of transport operations, implementing PPP models etc., will encourage

private sector investment and lead to greater demand for logistics services. Moreover,

growth of user industries like retail, telecom, consumer goods, automotive,

pharmaceuticals, foods and beverages etc. notwithstanding the current economic

slowdown will provide further impetus to logistics services across sectors. Drivers like

these and the push / pull pressures created by the market forces will not only trigger

structural changes in the logistics industry resulting in specialization, consolidation,

outsourcing, service migration, new markets, new services but will also create challenges

around service, delivery, quality and cost as customer needs become more demanding

and complex.

Seeing these growth prospects, Indian Logistics sector seems to be a good investment

option by PE firms.

The logistics industry will continue to be the focal point of strategy formulation, operational excellence and

35