weekly update on indian logistics industry - four-s logistics track 12th july-18th...

FOUR‐S Consumer (Soft) Track

News of the Week 1 Investment Activity 2 News Update 3 Corporate Developments 4 Events Update 5 Stock Market Updates 5 Peer Benchmarking 6 About Four-S Services

7

India needs USD 500bn logistics investment for growth: McKinsey As per the report released last week by McKinsey on 'Transforming the nation's logistics infrastructure', India's existing network of roads, rail and waterways will be insufficient as freight movement will increase about three‐fold in the coming decade and the shortfall in logistics will put the nation's growth at risk. To overcome this major problem, based on the current trends, India requires to spend USD 500bn over the next 10 years. Of this estimated amount to be spent on logistics infrastructure, roads would account for more than 50% followed by 40% on rail. The report says that India requires an integrated and coordinated approach in which the development of each mode—railways, waterways and roads—is matched to the needs and existing assets are better utilised. If India fails to achieve this, waste caused by poor logistics infrastructure will increase from the current level of USD 45bn (equivalent to 4.3% of GDP) to USD 140bn by 2020 (more than 5% of the GDP). The report also suggests four major shifts including, 1. Building the right network and ensuring flows on the right mode, comprising an integrated mesh and seven high‐density long‐distance corridors (rail and coastal waterways), 150 medium‐distance rail and road connectors and about 700 last mile links. 2. Creating enablers to maximise the efficient use of the network which includes developing 15 to 20 logistics parks, providing standards for containers and pallets and upgrading the skilled workforce.

Vol. V, 10th July’10 – 16th July’10

Weekly Update on Indian Logistics Industry

LOGISTICS TRACK

News of the Week Content

Research Desk Four‐S Services is India's leading provider of high‐end research, financial consulting and Investment banking services. We have executed projects for prestigious Indian as well as global corporations, investment banks, private equity funds, venture capitalists and hedge funds including India’s Top 5 PE Funds. For further information, please contact Seema Shukla at seema@four‐s.com or reach us as http://www.four‐s.com

3. Extracting more from existing assets by increasing the share of toll plazas with electronic tolling, using stainless steel wagons with higher load carrying capacity and increasing spend on maintenance of roads 4. Allocating more investment to rail and reallocating within roads and rail.

Four‐S Logistics Track

Investment Activity

Source: Four‐S Database

Private Equity Deals in 2009

Mergers & Acquisitions in 2009

Date Investor Target Stake (%) Amount (USD mn)

Strategy

12-Feb Clearstone Venture Partners, Granite Hill Elbee Express NA 2.6 Growth

5-May India Value Fund Advisors Innovative B2B Logistic Solutions 50+ 40.0 Buyout

20-Jul Fung Capital Future Supply Chain Solutions 26.0 30.0 Growth

24-Jul BTS Investment Advisors Caravel Logistics 17.0 5.2 Growth

9-Aug IFC Snowman Frozen Foods NA 5.0 Late

18-Sep Blackstone Group Allcargo Global Logistics 5.7 23.0 PIPE

22-Sep India Infrastructure Fund Gati Ltd. NA 1.7 PIPE


Business

31‐Mar Gati Ltd. Kausar India 26.0 NA A Trucking Service Provider 12‐Mar Allcargo Global Logistics Gateway Distriparks 6.0 5.6 Infrastructure‐ Logistics

Private Equity Deals in 2010 till date


Business

5‐Mar Nippon Yusen Kaisha TM International 26 NA Logistics Services29‐Mar Aqua Logistics CIT Logistics NA NA Logistics

Aqua Logistics TAG Logistics NA NA LogisticsAqua Logistics AGI Logistics NA NA Logistics

30‐Apr Hitachi Transport Flyjac Logistics NA 56.3 Logistics

Mergers & Acquisitions in 2010 till date


Strategy

9‐Mar Mayfield Fund, SIDBI Venture Fourcee Infrastructure NA 10.8 Growth

25‐MarReliance Venture Management, KPCB, Sherpalo Ventures Reverse Logistics NA NA Growth

8‐Jul Eredene Capital Ocean Sparkle 8.2 11.1 Growth

Four-S Indian Private Equity Report-2009 Four-S has used its extensive experience of working closely with leading PE firms to put together a report that presents all the current issues and trends necessary for PE executives, Board Members, investors and management of private equity portfolio companies”.

Four-S Indian PE Directory 2010 – “A Guide to choosing private equity partners” • Detailed listing of ~330 Active PE/VC Investors in India ‐ PE/VC players that have invested in the past 3 years. • A first‐of‐its‐kind, the directory offers “Deal History” in India for individual investor. • Management, investment profile and Contact details. • User‐friendly Spreadsheet Format. • It comes from Four‐S Services, the most trusted deal information bank in India.




The Shipping Ministry asks all major ports to tap ship‐repair business In order to increase the revenues and meet the demand for more repair units, the Ministry of Shipping has asked all major ports to tap ship‐repair business. India has only 35 ship repairing units where as China has 200 ship‐repairing yards in addition to 316 ship building yards. The ministry has asked the ports to develop their own business model and to take the projects through public private partnership route to reduce the capex. According to the Planning Commission, Indian ship repairing market is worth ` 27.9bn a year, of which ` 14bn is pegged to come from foreign ships. The commission has said in its report on ship‐building and ship‐repair business for 2007‐2012 that India can become a leading ship repair nation by offering the “most cost effective repair solutions” with availability of cheap labour. At present, Mormugao Port Trust has an active ship repair facility and Mumbai Port Trust has just installed the unit which is expected to get operational soon. The ministry also plans to formulate a captive use policy for major ports that will enable a port trust to give the underutilized facility constructed by captive users to others. SIAM seeks discount on automobile haulage by the Indian Railways The Society of Indian Automobile Manufacturers said that the intended plan by the Indian Railway to develop automobile and ancillary hubs would succeed only with proper incentives. According to Sugato Sen, Senior Director at SIAM, the present transportation of automobiles by railways is 15% to 20 % higher than the cost incurred for carriage via road and there is a need for a minimum 20% discount on container haulage and over 35% discount on current new modified goods freight rates to bring it at par with transportation by roads. During the last fiscal, around 2mn passenger vehicles were sold in India of which only 5% were transported by railways. As compared to that, in the US, 70% of automobile transport is via railways while it is 35% in Europe and 16% in China. In the developed markets the transportation cost by railways is 10% cheaper than that by the road. Railway's 'Out Agency' to manage fertilizer distribution in Bilaspur The Union ministry of chemical and fertilizers has agreed to open one ‘Out Agency’ of Indian Railways for transportation,

storage and distribution of fertilizers at Bilaspur, while Himachal Pradesh would be getting two rakes of fertilizers soon. The 'Out Agency' ‐ appointed by the Indian Railways, would be operated through Kiratpur goods terminal and fertilizer supplies would be transported from Kiratpur to Bilaspur. The reimbursement of freight would be made by the Union ministry of chemical and fertilizers. OOCL, NYK Line and Hyundai Merchant Marine to levy congestion charge at JNPT Three more ocean carriers ‐ Orient Overseas Container Line, NYK Line and Hyundai Merchant Marine have announced the emergency congestion surcharge on all import containers handled at Jawaharlal Nehru Port (JNPT) from Thursday (July 15). The surcharge will be USD 150 per 20‐foot equivalent unit and USD 300 per 40‐foot equivalent unit. Earlier APL, NYK Line, Hyundai Merchant Marine and Wan Hai Lines have levied a USD 150 per TEU and USD 300 per FEU all inbound containers shipped through the port. WAREX: Warehouse Excellence Certification by CII Institute of Logistics CII Institute of Logistics unveiled the WAREX warehouse excellence certification at the Auto SCM 2010 in Chennai. The endeavor by CII, not only assesses but also certifies the overall functionality of the warehouse. This certification process will enable the service provider to understand the current level and upgrade to the next level and also helps end user to choose their appropriate collaborative partner that will suit their supply chain design. R Dinesh, Event Chairman, Auto SCM 2010 said, "This certification process recognises the efforts and the practices followed in a warehouse, which is based on the level of complexity, sustainability, scalability required to run a warehouse. The CII Institute of Logistics offers warehouse certification process for the benefit of business in India to enable the warehouse service provider to assess their operation and process and to enhance business and the end‐user service.” Coal India plans to build terminal for imports To meet increasing demand of the fuel, Coal India Ltd., the world's largest producer intends to build a terminal in JV with Vishakhapatnam Port Trust (VPT) by 2013 to handle 6mn metric tonnes annually. According to industry analysts, the facility may cause as much as ` 5bn. The facility will help Coal India to receive ships on a priority basis, speed up unloading and reduce costs substantially."

News Update


Apollo LogiSolutions to invest Rs 13bn over the next 5 years Apollo LogiSolutions (ALL), a fully owned subsidiary of Apollo International has planned to invest ` 12‐13bn to set up at least 9‐10 Container Freight Stations (CFS) and Inland Container Depots (ICDs) by 2015. The company has already invested ` 1.2bn in its first CFS at Panvel, last year. ALL has entered into a JV with Toronto‐based Spire Group to construct and operate temperature‐controlled warehouses in the country. Raaja Kanwar, Vice Chairman and Managing Director of Apollo International said that the company is in talks with couple of companies for acquisition in domestic as well as international makets. The promoters would bring in a part of the said investment while the rest would be through debt. In the next 5 years, ALL is targeting for pan India presence leveraging the 'Apollo' brand. Allcargo plans shipping foray The leading logistics company, Allcargo Global is planning to enter shipping and offshore oilfield services within next couple of months. According to company officials, the company will start with chartering vessels and gradually acquire its own. The officials did not divulge any investment details. The company is also planning to expand its reach in LCL segment through inorganic route. Allcargo is also planning to strengthen its 3PL business by developing its existing landbanks at Nagpur, Bangalore, Pithampur and Hyderabad. Sesa Goa to invest USD 500mn for expansion Sesa Goa Ltd is planning to invest about USD 500mn for expansion of its mining and logistics infrastructure. In the company's latest annual report, Prasun Mukherjee, CEO and MD has said, “The investments would be in machinery including improved processing plants and higher capacity heavy earth moving equipment. On the logistics front, this includes developing access roads, port handling facilities, railway siding and the barge fleet.” Aqua Logistics to acquire 4‐5 companies The leading 3PL service provider is looking to acquire 4 to 5 companies in Indonesia, Thailand, Singapore, Vietnam and Russia. To fund the acquisitions, the company is planning to raise USD 70mn either through QIP, GDRs or FCCBs. The company is looking at equity dilution of 15% where promoters hold 50% stake. The company, which is present in verticals such as pharma, retail, automobile, sports and events, plans to go aggressive in the power and oil & gas verticals. Aqua Logistics Hong Kong Ltd ‐ the wholly owned subsidiary of Aqua Logistics, recently acquired 3 Hong Kong‐based companies ‐

‐ CIT, TAG and AGI Logistics. The acquisitions are likely to increase the topline by ` 1.5bn and bottomline by ` 80mn to 100mn. MS Sayad, Vice Chairman, Aqua Logistics said, "The acquisition in Indonesia will focus on the power vertical for the procurement of coal, Thailand will be for liquid gas, and acquisitions in Singapore, Russia and Vietnam will address the company’s oil & gas vertical". As per the analysts, the acquisitions will help the company to increase its geographical reach and compete with the MNCs. Aegis Logistics plans necklace of terminals Aegis Logistics has announced that it will be building a necklace of port terminals around Indian coastline, construct inland depots and auto‐gas retail outlets. At the AGM, KM Chandaria, Chairman, Aegis Logistics, said, "The next major stage of our growth is in the oil & gas logistics business. The opportunities in the segment include transit storage and re‐export of crude oil and petroleum products, bunkering business which entails refueling of ships with marine fuels, jet fuel logistics for the airline industry and non‐fuel retailing in the auto‐gas stations." Saudi Arabia to become the world's leading transportation and logistics hub According to the report by Soudi Arabian General Investment Authority (SAGIA), the strategic location of the country and large scale infrastructural developments will position Kingdom of Soudi Arabia as one of the leading transportation and logistics hub in the world. The nation already boasts numerous land and sea routes to Eastern Europe, the Indian subcontinent, the Middle East and North Africa plus East Asia. However, SAGIA, in collaboration with domestic and international partners, is now making substantial investments in a sophisticated transportation network that will leverage KSA's competitive advantages. The development of a world‐class, multi‐modal transportation system in Saudi Arabia will improve operating efficiencies and speed to market for businesses looking for strategically located transportation systems for distribution and/or supply chains. The key investment positives includes, unparalleled land and sea lane access, with close links to Europe, Africa, South and East Asia, Substantial cost advantages, Large‐scale, mutually reinforcing investments in road, rail, sea, and aerial transportation, Strong domestic growth and a highly stable, competitive and increasingly liberal business environment. SAGIA has identified 19 priority investment opportunities for transportation facilities, 15 of which would be based in the planned Economic Cities. Overall, a USD 100bn investment is anticipated over 10 years.

Global News and Corporate Developments



Event: Conference: Essentials of Supply Chain Management Date: 31July 2010 Place: Gurgaon Organiser: ThinkLink Supply Chain Services Tel: +91 9873924539 Web: http://thinklink‐scs.com/

Event: SOLE‐2010: Global Logistics Sustainability ‐ 45th Annual International Logistics Conference & Exhibition Date: 17‐19 August 2010 Place: Texas Organiser: The International Society of Logistics Tel: (301) 459‐8446 Web: http://www.sole.org/

Event: Conference: SME Expo: Logistics & Material Handling 2010 Date: 19‐21 August 2010Place: Chennai Organisers: INIS Enterprises & ICICI Bank Business Banking Tel: 022‐40470600, 28763111 Web: http://www.sme‐expo.com/

Events Update


Stock Market Update

Baltic Dry Index: Daily Movement during the week

Source: Bloomberg

‐ quantity because of the government's take to cool down real estate market. It has resulted into lot of spare capacity available in dry side and very low tariffs. Citing the continuous fall in BDI since last one and half months, industry analysts are inclined to avoid the shipping stocks. Allcargo allots 8598 Equity Shares under ESOP Scheme Allcargo Global Logistics Ltd has announced the allotment of 8,598 equity shares of ` 2 each fully paid of the Company to its employees in exercise of options granted to them under 'Allcargo Employee Stock Option Plan 2006'. The paid up share capital of the Company has been increased from ` 261,016,740 divided into 130,508,370 equity shares of ` 2 each fully paid up to ` 261,033,936 divided into 130,516,968 equity shares of ` 2 each.

Industry analysts to avoid shipping stocks The exports from China and Europe have fallen down considerably as China is not importing iron ore in much ‐

As on 16th July 2010 Market Cap Price(In ` mn) (In ` ) 1W 1M 3M 6M 12M

Container Corporation of India 184,467.6 1,419.20 2.5% 11.9% 2.3% 7.3% 47.1%Shipping Corporation of India 65,973.5 155.80 ‐2.9% ‐5.6% ‐1.1% ‐9.8% 23.1%Great Eastern Shipping 44,473.4 292.05 ‐2.8% ‐0.6% ‐9.9% ‐8.3% 16.8%Blue Dart 25,403.0 1,070.50 ‐1.0% 17.3% 12.0% 62.2% 114.7%Allcargo Global 22,119.8 169.50 ‐0.1% ‐1.1% ‐9.5% ‐15.5% 7.1%Arshiya International 13,562.4 230.85 ‐2.1% ‐3.2% 3.7% 20.6% NAGateway Distriparks 12,502.9 115.80 1.4% ‐4.8% ‐9.0% ‐15.4% 25.2%Aqua Logistics 11,441.1 558.10 2.8% 15.2% 91.5% NA NAMercator Lines 11,186.4 47.40 ‐0.6% 2.8% ‐21.1% ‐33.2% ‐15.7%Transport Corporation of India 9,802.0 135.20 8.6% 14.4% 23.7% 35.3% 111.3%Aegis Logistics 8,100.0 430.85 9.2% 19.5% 51.1% 98.9% 273.8%Varun Shipping 6,397.5 42.65 ‐2.2% ‐0.2% ‐16.5% ‐27.9% ‐24.3%Gati 5,777.4 67.85 ‐1.1% 12.2% 9.4% 2.4% 49.6%Sical Logistics 2,853.3 72.20 5.4% ‐1.4% ‐25.0% ‐26.7% 104.2%Shreyas Shipping & Logistics 733.5 33.40 1.5% ‐1.3% ‐9.7% ‐16.1% 14.8%Patel Integrated Logistics 582.8 38.65 2.5% 24.7% 6.0% ‐4.6% 71.4%NSE Nifty ‐ 5,393.90 0.8% 3.1% 2.5% 2.7% 27.5%BSE Sensex ‐ 17,955.82 0.7% 1.9% 2.1% 2.3% 21.8%ET Logistics Index ‐ 23,596.46 1.9% 8.7% 2.2% 7.1% 53.1%Baltic Dry Index (BDIY:IND) ‐ 1,720.00 ‐9.6% ‐40.5% ‐42.8% ‐47.9% ‐48.3%

Percentage Change (%)


Results Update – Last Quarter Ended 31st March 2010

Results Update – Annual

Q4 FY’09 Q4 FY’10 YoY Q4 FY’09 Q4 FY’10 YoY Q4 FY’09 Q4 FY’10 YoY EBITDA NPM

CONCOR 8,412.17 9,505.32 13% 6,472.34 1,836.30 ‐72% 1,299.82 1,727.20 33% 19% 18%Shipping Corp. of Ind. 8,069.50 8,894.20 10% 4.90 513.30 10376% 2,007.60 1,358.50 ‐32% 6% 15%GE Shipping 5,342.50 5,132.20 ‐4% 600.50 816.70 36% 2,500.50 974.00 ‐61% 16% 19%Allcargo Global 4,806.40 5,857.59 22% 439.93 421.50 ‐4% 276.29 340.40 23% 7% 6%TCI 3,267.20 4,020.80 23% 284.00 249.70 ‐12% 112.00 125.40 12% 6% 3%

Mercator Lines 5,757.09 3,583.12 ‐38% 3,268.98 (6,187.34) ‐289% 1,647.74 (129.42) ‐108% ‐173% ‐4%Blue Dart 2,090.70 2,576.10 23% 1,931.10 2,222.90 15% 237.30 237.30 0% 86% 9%Varun Shipping 2,604.72 2,290.52 ‐12% 430.60 715.44 66% 60.89 (9.63) ‐116% 31% 0%Gati 1,547.90 1,891.90 22% 81.20 145.10 79% (170.60) 41.10 ‐124% 8% 2%Sical Logistics 1,765.91 1,886.33 7% 122.23 4.85 ‐96% 590.43 (13.44) ‐102% 0% ‐1%

Aqua Logistics NA NA NA NA NA NA NA NA NA NA NAAegis Logistics 629.10 809.80 29% 80.70 153.30 90% 45.70 114.00 149% 19% 14%Patel Integrated 630.14 896.02 42% 11.06 23.11 109% 3.13 18.76 499% 3% 2%Gateway Distri. 423.22 395.93 ‐6% 207.84 169.69 ‐18% 183.26 216.92 18% 43% 55%Shreyas Shipping 230.62 232.48 1% 248.14 (36.57) ‐115% 219.57 (38.09) ‐117% ‐16% ‐16%

Arshiya NA 1,688.92 NA NA 249.68 NA NA 184.78 NA 15% 11%

EBITDA PAT Margins Q4 FY’10Company Revenue

All figures in ` million

FY'09 FY’10 YoY FY’09 FY’10 YoY FY’09 FY’10 YoY EBITDA NPM

CONCOR 34,171.60 37,022.71 8% 8,151.50 12,835.03 57% 7,912.00 7,079.48 ‐11% 35% 19%Shipping Corp. of Ind. 41,666.40 34,631.20 ‐17% 7,976.10 889.30 ‐89% 9,406.70 3,769.10 ‐60% 3% 11%GE Shipping 40,460.30 30,414.50 ‐25% 13,557.70 4,860.90 ‐64% 14,178.30 5,127.60 ‐64% 16% 17%

Allcargo Global 23,140.81 20,609.33 ‐11% 1,750.84 1,640.40 ‐6% 1,077.02 1,299.40 21% 8% 6%TCI 13,568.50 15,223.90 12% 779.40 849.90 9% 332.60 412.70 24% 6% 3%Mercator Lines 22,488.24 14,313.03 ‐36% 7,160.69 (1,243.62) ‐117% 3,764.53 532.39 ‐86% ‐9% 4%Blue Dart 9,816.10 9,097.10 ‐7% 1,139.70 885.50 ‐22% 779.60 611.90 ‐22% 10% 7%

Varun Shipping 9,926.74 8,966.46 ‐10% 2,713.18 2,341.27 ‐14% 1,228.05 125.52 ‐90% 26% 1%Gati 7,458.50 8,029.60 8% 277.50 358.30 29% 195.90 (186.60) ‐195% 4% ‐2%Sical Logistics 6,773.91 7,621.02 13% 570.36 21.67 ‐96% 180.12 (356.44) ‐298% 0% ‐5%Aqua Logistics NA 3,220.12 NA NA 309.36 NA NA 205.41 NA 10% 6%

Aegis Logistics 3,869.10 3,056.90 ‐21% 416.50 586.50 41% 273.90 430.20 57% 19% 14%Patel Integrated 2,830.71 2,460.34 ‐13% 65.85 89.05 35% 29.03 42.65 47% 4% 2%Gateway Distri. 2,035.63 1,616.94 ‐21% 1,040.53 679.19 ‐35% 937.57 772.08 ‐18% 42% 48%Shreyas Shipping 3,151.33 1,478.54 ‐53% 154.99 (127.03) ‐182% 55.86 (157.05) ‐381% ‐9% ‐11%

Arshiya NA NA NA NA NA NA NA NA NA NA NA

Revenue EBITDA PAT Margins Q4 FY’10Company

All figures in ` million

Note: All results are on standalone basis except for Aegis, Allcargo, Arshiya, Sical and Mercator Lines which have consolidated. Also, for Allcargo and Bluedart, the financial year spans between January and December; the same for Gati is July and June


Source: Companies, Four‐S Research

Source: Companies, Four‐S Research


Founded in 2002, Four‐S has a strong & successful track record of genuine, accurate and objective advice to top Indian & global companies & PE Firms. Four‐S has already proven success in corporate finance, strategy consulting, fund‐raising, investment banking and investor relations mandates with 100+ corporates and large PE funds

Four‐S Services Pvt Ltd

Four‐S, trusted advisor to top Indian & Global Cos

Offering comprehensive bouquet of services to SMEs, Corporates and PE Funds

Research Desk


About Four‐S Services Four‐S Services provides customized business and financial research to organizations across the globe. The company also provides Investor Relations consulting to corporate based on in‐depth sectoral and company research. The company has an impressive client profile and a team of senior analysts covering key sectors including Finance & Banking, IT & Telecom, Retail, Media & Entertainment, Pharmaceuticals, Infrastructure and Manufacturing amongst others. For further information on the company please visit www.four‐s.com

Disclaimer The information contained herein has been obtained from sources believed to be reliable but is not necessarily complete and its accuracy cannot be guaranteed. No representation, warranty, guarantee or undertaking, express or implied, is made as to the fairness, accuracy or completeness of any information, projections or opinion contained in this document or upon which any such projections or opinions have been based. Four‐S Services Pvt Ltd. will not accept any liability, whatsoever with respect to the use of this document or its content. This document has been distributed for information purposes only and does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities. This document shall not form the basis of and should not be relied upon in connection with any contract or commitment whatsoever. This document is not to be reported or copied or made available to others. The Company may from time to time solicit from, or perform consulting, or other services for, any company mentioned in this document.

weekly update on indian logistics industry - four-s logistics track 12th july-18th...

Documents