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KBuzzSector Insights
April 2011
kpmg.com/in
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As the summer months come to an end, both farmers and policy makers in the country
are hoping for a good monsoon this year, given that the monsoon is crucial as a source
of irrigation for 60 percent of the farms in India and approximately two thirds of India’s
population depend upon agriculture for their livelihood. With India being the world’s
second biggest producer of rice, sugar and cotton; inflation rising—food inflation rose by
8.55 percent in the week ending May 14—and the direct correlation between disposable
income and ample rainfall, a timely and evenly-distributed monsoon also augurs well for
the economy as a whole.
On a silver lining, PM Manmohan Singh signed a slew of trading and investment
agreements with countries across the African continent and offered them three-year
credit lines of USD 5 billion to achieve their development goals, while attending the India
Africa Forum Summit in Ethiopia. India-Africa trade stood at USD 46 billion in 2010 with
India setting an ambitious target of reaching USD 70 billion by 2015.
I hope you find this edition of KBuzz insightful and interesting.
Regards,
Vikram
Head – Markets and Private Equity Advisory
KPMG in India
Sources
http://online.wsj.com/article/SB10001424052702304520804576346741093655236.html
http://www.hindustantimes.com/Despite-delay-monsoon-on-track/Article1-702403.aspx
http://www.thenational.ae/thenationalconversation/industry-insights/economics/indias-big-push-into-africa
http://www.monstersandcritics.com/news/business/news/article_1641360.php/India-promises-Africa-5-billion-dollar-credit-line
http://www.mydigitalfc.com/news/india-14-african-nations-strengthen-mutual-trade-889
1© 2011 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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TRANSPORTATION &
LOGISTICS
32© 2011 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
8/3/2019 KPMG Air Freight
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-
7,000
14,000
21,000
28,000
35,000
42,000
FY06 FY07 FY08 FY09 FY10
T o n n e s h a n d l e d
Cochin
Trivandrum
Ahmedabad
Pune
Calicut
Agartala
Jaipur
Indore
Guwahati
Imphal
Amritsar
“Against the national
benchmark of air freight
growing at 8.5 percent
(FY06-FY10), the tier 2
hubs have been
growing at CAGR of
11.8 percent shifting
focus to emerging air
hubs like Cochin,Jaipur, Pune,
Ahmedabad and
Coimbatore”
- Manish Saigal
Head
Transportation &
Logistics
KPMG in India
Transportation & Logistics
KPMG view – Air freight hot spots
Manish Saigal
Head
Transportation & Logistics
msaigal@kpmg.com
Overview
The airfreight sector in India has been witnessing a steep and consistent growth
over the last few years. Driven by India’s strong GDP growth, rising domestic
consumption and EXIM trade as well as supply side improvements, the air freight
market has grown at a CAGR of 8.5 percent (FY06-FY10) to reach 1.95 million
tonnes in FY10. It is expected to grow at a higher CAGR 10.5 percent over the next
few years to reach 3.2 million tonnes by FY15. This growth will, in turn, be
supported by planned investments of over INR 80,000 crores1 in the airport sectorin the XIIth Five Year Plan, more than double of the INR 36,000 crores2 in the XIth
Plan, leading to the development of world class airport infrastructure at Delhi,
Mumbai, Chennai, Hyderabad, Bengaluru and several other locations and
corresponding strong traffic growth in these key hubs. However, these trends
stretch well beyond the metropolitan cities into Tier 2 locations creating novel
opportunities – the subject of this paper.
Aggressive emergence of Tier 2 air cargo hubs3
Against the overall growth of CAGR 8.5 percent between FY06 and FY10, the air
freight market at metro/tier 1 hubs has grown at a CAGR of 8.3 percent from 1.27
million tonnes to 1.75 million tonnes. In contrast, the tier 2 hubs have grown at a
CAGR of 11.8 percent from 132,000 tonnes to 207,000 tonnes in the same period.
• Amongst the larger micro-markets, Cochin has experienced the steepest growthdoubling volume to 42,000 tons in four years. Trivandrum and Ahmedabad are
other large markets that have demonstrated good growth.
• Pune and Calicut are other locations that have broken into 10,000 tons+
category in the same period and are growing at a CAGR ~20 percent
Note: 1. Estimated assuming share of investment in airports in XII Plan remains approximately same as that in XI Plan;
2. Revised projections from Planning Commission of India, January 2011;
* . Analysed airports include those with either >15,000 tonnes freight or >20 percent growth rate (except Guwahati – included for North-eastern comparison)
Source: 1. Planning Commission, KPMG Analysis;
2. Planning Commission, KPMG Analysis;
3. All quantitative figures (volumes, growth rates, etc.) in this section are based on information from Crisil’s Airport Industry Statistics July 2010 and KPMG Analysis
• Jaipur, given the growth rate of CAGR 27.3 percent, seems to be the next crucial
destination catering to the increasing freight demand in North-Western India.
• Among other tier 2 cities handling sub-10,000 tonnes volume, a firm trend
appears with respect to North-Eastern India. Guwahati (CAGR~2.3 percent), the
traditional leader, is being overtaken by Agartala (22.9 percent) and Imphal (31.1
percent). Though these high growth rates can be attributed to low base volumes,
the actual volume handled by these twin cities have risen drastically to compete
with Guwahati’s benchmark of ~ 5,000 tonnes.
Air freight at major Tier 2 hubs*
Source: Crisil’s Airport Industry Statistics July 2010 and KPMG Analysis
33© 2011 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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The key drivers behind increased freight handling at airports such as Cochin,
Trivandrum and Ahmedabad include rising local demand, improved international
connectivity and the resultant hubbing activity and expanding cargo-handling
infrastructure. Other emerging hubs such as Pune, Jaipur, etc.5 are witnessing high
growth rates primarily driven by increasing domestic volumes, freight handling
services by low cost airlines and better connectivity.
Segregated by attractiveness for 3PL players and freight forwarders
Further analysis suggests that these upcoming hubs can be broadly classified into
two categories - 1) attractive-for-3PL players, and 2) attractive-for-freight forwarders -
based on the hub’s domestic versus EXIM focus.
Transportation & Logistics
Note: # – Airports have been analyzed based on FY10 volumes handled as reported by the respective airports; aassumption: 3PL players and
freight forwarders are respectively domestic and EXIM cargo-focussed
Source: 5 – Crisil’sAirport Industry Statistics July 2010 and KPMG Analysis
Location attractiveness for 3PL players and freight forwarders #
KPMG’s perspectiveThere are ample opportunities for players across the logistics value chain to enter
and/or expand their presence within India’s air freight sector, driven by strong
demand as well as improved carrier services. While metro or Tier 1 cities will
continue to dominate the overall market, we believe that it is the new set of Tier
2 cities that represent new and uncluttered opportunities. Service provider firms
will do well to evaluate their presence, focus and service orientation in thesenew locations in the context of this unprecedented growth being experienced in
these locations.
Nagpur
Low
(<1,000 tonnes)Medium
(~ 10,000 tonnes)
High
(>30,000 tonnes)
Medium
(~10,000
tonnes)
High
(>30,000
tonnes)
Attractive-for-freightforwarders
Attractive-for-3PL
CalicutTrivandrum
Goa
Cochin
Ahmedabad
Coimbatore
Jaipur
LucknowLow
(<1,000
tonnes)
Pune
Agartala
Indore
Guwahati
Imphal
Source:Crisil’s Airport Industry Statistics July 2010 and KPMG Analysis
Legend:
CAGR (FY06 -FY10)
20% or more
>10-20%
<10%
<0%
34© 2011 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG view – Air freight hot spots
8/3/2019 KPMG Air Freight
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TargetTarget
country
Acquirer/
investor
Acquirer/
investor
country
Deal typeDeal value
(USD Mn)
Stake
acquired
Continental
WarehousingNhava Sheva
India WarburgPincus US PEinvestment 100 NA
GMR Airports
HoldingIndia StanChart PE India
PE
investment150 NA
Transpole
LogisticsIndia Fidelity US
PE
investment13 NA
Atlas Logistics India SBS Holdings Japan Acquisition 33 80
Nikkos Logistics IndiaAqua
LogisticsIndia Acquisition 33 70
Transportation & Logistics
Source.Venture intelligence database
Key recent deals
35© 2011 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG view – Air freight hot spots
8/3/2019 KPMG Air Freight
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The information contained herein is of a general nature and is not intended to address the circumstances
of any particular individual or entity. Although we endeavor to provide accurate and timely information,
there can be no guarantee that such information is accurate as of the date it is received or that it will
continue to be accurate in the future. No one should act on such information without appropriate
professional advice after a thorough examination of the particular situation.
© 2011 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of
KPMG International.
kpmg.com/in
This document has been compiled by the Research, Analytics, and
Knowledge (RAK) team at KPMG in India.
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