Logistics Sector : Sector of Future

LOGISTICS SECTOR

Sector of the Future

Logistics has been a traditionally dull business in India, at least as far as the  capital Market is concerned. The market has not taken up in a big way to any logistic company in the past, except perhaps Blue Dart and a few courier companies in the past. For a brief while.

The Logistics business has undergone a major transformation in the last one decade, and today in our view it is the business of the future. There are many players in this segment and new avenues of doing this business have opened up. There could be even more changes in the offing, and in our view this sector needs close watching. There is scope for large players emerging in this segment, and catching the possible candidates early may yield huge returns over the long term.

In this Report we have tried to identify such potential leaders. The companies included in this Report have the potential, but have not yet grown to their full potential . Will they grow as per expectation? We think so, but only time will tell.

 

SERVICES OFFERED

PEER COMPARISON

Logistics Companies

Segment Mix

It is very important to have good segment mix for any logistics company. We have selected three companies out of the logistics universe. These three companies have fully integrated businesses across all segments. All the three companies are leaders in particular segments.

· Allcargo is the leader for Multimodal Transport Operations. Allcargo is also focusing on expanding its network across the world and it is adding more and more ECU line franchises.

· Arshia Int. has setup a rail network across the nation which helps it for inland transport movement. Further the company is focusing more on its FTWZs operation. Currently it possess only 16% business share which is likely to  increase sharply over the years.

· GDL is operating through its two subsidiaries named GDL Rail and Snowman. While very different from the other two companies, GDL has 50-50 business mix from transport operation and CFS operations. Further the company is expanding more on the front of Cold Chain and Distripark business.

SEGMENT WISE PBT MARGINS

Traditionally Logistics Companies were running with very low profit margins, because of asset heavy and labor intensive business model. But now a days the scenario is changing since couple of years, because of operation optimization and implementation of efficient machinery. Among these three companies also there are big gaps in profit margins. Arshiya Int. has highest margins in all the three segments that are because of its business mix. Its FTWZ/CFS segment offers many unique benefits and value added services for exporters and to re-exporters. Further lower business share from this segment prevented a major impact on bottom-line. Because of that Arshiya is going to expand its FTWZ/CFS segment.  Gateway Distripark has very thin margin for its transport segment. But the company has good margins in its cold chain operations. Though Allcargo is the leader in MTO, this segment has very low margins. Overall, all the three companies manage profit margins by managing business mix.

For investment purpose one can have exposure to all the three companies as each of them is leader in its particular segment. Allcargo will be benefited by its logistics network through its direct office as well as through its franchisees. Arshiya International has introduced new concept of FTWZ in Indian Logistics sector which will gain the biggest benefit of growing exports and imports. GDL is the only company which has organized pan India cold chain transportation network. Keep reading my blog to have company specific update for these three and many more companies.

Happy Investing !!

 

Port capacity to double in 5 yrs

The Indian port capacity is set for two fold rise during next five year to more than 2300 Mn. Tn. (MT). According to 12th Five Year plan (2012-17) document, it is projected that the port volumes will cross 1750 MT level.

Total capacity of the country's ports, including 12 major and over 200 non-majors, stood at 1,247 MT in 2011-12 and together they handled 971 MT cargo. Major ports had the lion's share at 601 MT and the rest was done by the non-major ports.

The Plan Panel expects Jawaharlal Nehru Port Trust (JNPT) to have the maximum capacity at 156 MT by 2016-17 followed by Kandla Port at 145 MT.

Almost 95 % by volume, and 70 % by value of India's global merchandise trade is carried through the sea route. Out of 12 major ports, 11 are administered by respective Port Trusts and Ennore Port, the 12th major port, which in February 2011 started functioning, is coporatised.

The projected traffic and capacity for the major ports in 11th Plan Period was 708.09 MT and 1,016.25 MT respectively.

For non-major ports, the capacity was envisaged to grow to 575 MT from 228.31 in 2006-07. However, actual capacity in the non-major ports grew to 544.65 MT by 2011-12

Such major expansion on port facility will give more space to logistics companies. Allcargo Logistics and Arshiya International are among top companies which has major operation relating to sea route transportation. 

Allcargo is world leader for LCL while Arshiya is providing unique service of FTWZ at JNPT. 

Piramal eyes In-Organic way

Piramal eyes Ind-Swift facilities in Rs 1k-cr deal

Company is always looking at acquisitions: Swati Piramal The deal street is abuzz with talk of another transaction in the pharma space. Mumbai-based Piramal Healthcare is in talks with the Chandigarh-headquartered Ind-Swift Laboratories to acquire its contract research and manufacturing business and many of its facilities approved by the US Food and Drugs Administration (US FDA), sources say. The deal, under negotiation, is valued at Rs 1,000-1,200 crore, at least two persons close to the development have told Business Standard. “I cannot comment on market speculation,” said Piramal Healthcare Vice-Chairperson Swati Piramal. However, she said the company was “always looking at acquisitions”. Many from the Piramal top management are on a visit to Ind-Swift’s facilities, it is learnt. When contacted, Ind-Swift Laboratories Vice-Chairman and Managing Director N R Munjal refused to comment. The deal is expected to lift Piramal’s contract research and manufacturing services (CRAMS) and active pharmaceutical ingredient (API) manufacturing business, which constitutes a majority of its operations in the pharma segment after the company sold its domestic formulations business to Abbott Laboratories in 2010 for Rs 17,000 crore. Piramal’s CRAMS division, known as Pharma Solutions, provides services across the drug life cycle — from development to commercial manufacturing and off-patent supplies of APIs. In financial year 2011, Pharma Solutions reported revenues of Rs 1,020 crore. Ind-Swift Laboratories is well placed in both emerging and developed markets. According to its website, Ind-Swift Laboratories is a $250-million (Rs 1,375 crore) company with a commercial manufacturing facility at Dera Bassi, Punjab, which has regulatory approvals from various countries, including the US.  Besides, the company also has 18 other manufacturing blocks and a fully equipped pilot plant. The company, established in 1995, is listed on stock exchanges in Mumbai and Luxembourg. In the past too, Piramal Healthcare had evaluated options to buy Ind-Swift’s CRAMS business and US FDA-approved units, a source said.