Container Logistics Sector - Tarragon Capital Advisors

8/10/2019 Container Logistics Sector - Tarragon Capital Advisors

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INDIA LOGISTICS INDUSTRY

MARCH 2013

CONTAINER LOGISTICS (CONTAINER FREIGHT STATION &INLAND CONTAINER DEPOT) SECTOR

1Prepared by Tarragon Capital Advisors (India) Pvt Ltd


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I.INTRODUCTION (PAGES 3-5) VI.MARKET INFLUENCES(PAGE 37)

II.MARKET OVERVIEW (PAGES7-10), INTRODUCTION TOCFS/ICD (PAGES 11-17)

VII.KEY CHALLENGES (PAGES39-42)

III.PRE-REQUISITES &REGULATIONS (PAGES 19-24)

VIII. COMPETITION (PAGE 44)

IV.GOVERNMENTINITIATIVES (PAGES 26-32)

IX.STRATEGICRECOMMENDATIONS (PAGE 46)

V.FOREIGN INVESTMENT(PAGES 34-35)

X.EXECUTIVE SUMMARY(PAGES 48-53)

INDIAN CONTAINER LOGISTICS (CONTAINER FREIGHTSTATION & INLAND CONTAINER DEPOT) SECTOR

Prepared by Tarragon Capital Advisors (India) Pvt Ltd


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I.INTRODUCTION : EVOLUTION OF GLOBAL CONTAINERIZATION



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I.INTRODUCTION : EVOLUTION OF CONTAINERIZATION IN INDIA

*TEU - twenty-foot equivalent unit is based on the volumeof an inter-modal container, a standard-sized metal box,

which is designated as twenty foot long and 8 feet widePrepared by Tarragon Capital Advisors (India) Pvt Ltd


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The logistics industry is extremely fragmented in terms of servicesoffered and each player specializes in a particular sector/s. Eachsuch activity, therefore, represents a unique sub-vertical opportunityin and of itself

I.INTRODUCTION : EXPORT IMPORT FLOW CHART



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I.INTRODUCTION (PAGES 3-5) VI.MARKET INFLUENCES

(PAGE 37)





IV.GOVERNMENT

INITIATIVES (PAGES 26-32)

IX.STRATEGIC

RECOMMENDATIONS (PAGE 46)






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INDUSTRY OVERVIEW

INDUSTRY STRUCTUREPOTENTIAL FOR GROWTH IN EXIM TRADE

II.MARKET OVERVIEW



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II. MARKET OVERVIEW : INDIA LOGISTICS INDUSTRYOVERVIEW

Industry encompasses 5 freight segments Ocean, Rail, Air, Trucking &

Third-Party Services (3PL)

Current size is approx. US$100 bln and is expected to grow at 15 -20%annually to touch approx. US$350 bln by 2015 (source : Fitch RatingAgency); sub-sectors are growing between 30 - 40% per annum

61% and30% of total domestic product is transported via road andviarailrespectively (source : Deloitte, Logistics Sector report, Jan. 12)

The industry employs over forty-five million people (source : Deloitte,Logistics Sector report, Jan. 12)

Organized sector represents only 6% of the total size of the industry.This is projected to grow at a CAGR of 25% over the next 3 years (source: Nirmal Bang Group report, Nov. 11)

The strength of the logistics industry is, undoubtedly, going to be a keydeterminant of Indiasfuture growth



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LOGISTICS INDUSTRY STRUCTURE

INDIANLOGISTICSMARKET

ROADFREIGHT

EXPRESSLOGISTICS

CONTAINERLOGISTICS

LIQUIDLOGISTICS

CONTAINERHAULAGE

CONTAINER FREIGHTSTATION (CFS) ANDINLAND CONTAINER

DEPOT (ICD)

MULTIMODALTRANSPORTOPERATOR

*3PL - Third Party Logistics Services provider provides services such astransportation, warehousing, crossdocking, inventory management,

packing & freight forwarding, etc.

3PL*

II. MARKET OVERVIEW : INDIA LOGISTICS INDUSTRYSTRUCTURE



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Containerized logistics account for only 15% of Indias EXIM tradecompared to a global average of around 70% (source : Motilal Oswal, Onhigh Ground, Oct. 12). Containerized volumes are expected to touch 15million TEUsby 2015 for export and import (source : Subhashish Ghosh,Managing Director, APM Terminals)

Logistics costs in India are 13% of GDP much higher when compared toother economies (source : World Bank Report 10) arising mainly frompoor infrastructure facilities (leading to a higher turnaround time) andhigh costs of administration

Emergence of organized retail in India, increase in foreign trade, and rise

in status of India as a global manufacturing hub will lead to up-gradation/further development of infrastructure. Emerging MarketSurvey 11 (Transport Intelligence) re-confirms the view of India as one ofthe potentially strongest growth markets globally for the logisticsindustry

II. MARKET OVERVIEW : POTENTIAL FOR GROWTH IN EXIMTRADE



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The Indian logistics sector was valued at around $100 billion in 2012, ofwhich EXIM containerized logistics accounted for about 15 per cent

CFSs accounted for 40% andICDs for 60% of the container loads

CFS/ICD facilities have been rising (as seen on the next slide)due to increase in port traffic, increase in containerization levels, morecustom clearance activities in CFSs/ICDs, higher margins in comparison to

other logistical activities and construction of Dedicated Freight Corridor

II.MARKET OVERVIEW : INTRODUCTION TO CFS/ICD



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MARKETSIZE

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016

FISCAL YEAR

II. MARKET OVERVIEW : CFS/ICD SUBSECTOR GROWTHTREND



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II.MARKET OVERVIEW : INTRODUCTION TO CFS/ICD -DIFFERENCE BETWEEN CFS & ICD


ICD CFSLOCATION

In the interiors, awayfrom the servicing ports

It is an off dock facilitylocated near theservicing ports

FUNCTIONLargely deals with fullcontainer load which isaggregated for onwardmovement to or fromthe ports

Deals with break-bulkcargoorigination/terminatingin the immediatehinterland of a port;also serves as adestination for customsrelated activities


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INTERMEDIATESTORAGE FACILITIES

Provide storage between various transportation modes as well as storage of

EXIMProvision for storage of Reefer Containers (which require refrigerationservices) and hazardous cargo

RECEIPT/DELIVERYOF CONTAINERS

Weighing and inspection of cargo/packages and damages, etc.Transportation and receipt of import containers from the port, and

movement of export containers to the port

CONSOLIDATIONAND

DISTRIBUTION OFCARGO

In the case of LCL* cargo wherein cargo/containers cannot be received ordelivered directly to the consignee, then, in that event, cargo stuffing ordestuffing for LCL

DEPOT FUNCTIONS Storage of empty containers and temporary storage of loaded containers yetto be dispatched from the facilities

II.MARKET OVERVIEW : INTRODUCTION TO CFS/ICD SERVICES OFFERED BY CFS & ICD (1/3)

*Less than Container Load (LCL) is a service offered by freight forwardingcompanies, allowing shippers to book only part of a container. This is usefulwhen a shipment cannot fill up a container, but you would still like to get

the benefits of container shippingPrepared by Tarragon Capital Advisors (India) Pvt Ltd


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PORTDECONGESTION

Provide backup facilities for the portContainers, therefore, do not congest the port (prior to customs inspection and

loading on to the ship for onward delivery to the customer)

REDUCINGREDUNDANCIES

Reduce the cost of container logistics by providing the function ofconsolidating/stuffing cargo of exporters

Cargo transportation by road /rail to and from gateway port

CONTAINERHANDLING

Transportation by road, rail and barges to a CFS/ICD container yardTo and from transportation of containers under bond between ICDs/CFSs andports as well

developed multi-modal transport systems

PHYSICALDISTRIBUTION

Distribution of finished productsValue added services such as packing/repacking/tagging, etc.




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ONE STOP LOGISTICS &CUSTOMS SOLUTION

ICD/CFS aid in the containerization functionFacilitate stuffing/de-stuffing, transportation, customs clearance,warehousing, handling, storage and repairs of containers

CUSTOMS CLEARANCE

Custom's clearance activities at CFS/ICD help decrease the dwelltime of

containers saving costCustoms examination and stuffing of export cargoDe-stuffing of import cargoStorage of container (import loaded)Checking container sealsAssessment and valuation of cargo

OTHER FACILITIES

Pretrip trials of Reefer Containers to check if refrigeration equipment isfunctional

Cleaning services, maintenance and repair services for containers,container handling equipment, refrigeration equipment, road chassis




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GrowthDrivers

Streaming ofIndirect Tax

Structure

Increased Demandof 3 PL Services

Investment inTransportationInfrastructure

Infusion ofQualified Work

Force

Recognition oflogistics

management as astrategic tool

Globalization ofManufacturing

Sectors

II.MARKET OVERVIEW : INTRODUCTION TO CFS/ICD GROWTH DRIVERS



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IX.STRATEGIC







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The proposal for setting up such facilities includea feasibility report, land consideration, design and layout as well asequipment consideration which is examined by the InterMinisterialCommittee (IMC), Ministry of Commerce, on the basis of certain guidelineswhich are highlighted in subsequent slides

III.PRE-REQUISITES & REGULATIONS



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FEASIBILITY REPORT

The facility must be economically viable for : users, railways for full trainmovements in case of ICD, other transport operators and shipping linesTariff rates levied by operators for ground rent, cargo storage, loading andunloading, and transportation of containers to ports are also consideredMinimum level of traffic volume (twoway) is:

ICD 6,000 TEUs/yr

CFS 1,000 TEUs/yr

LAND REQUIREMENT Outside limits of major cities: minimum of 3 acresInside city limits /port area: minimum area of 1 acre

InterMinisterial Committee (IMC), Ministry of Commerce, is theregulatory authority which monitors the growth of CFSs/ICDs

IMC comprises representatives from the Department of Revenue,Ministry of Surface Transport, Ministry of Railways and the Ministry ofCommerceThe Committee considers the proposals submitted by public andprivate sector entrepreneurs for setting up of new ICDs/CFSs at differentcenters in the country and monitors their progress

III.PRE-REQUISITES & REGULATIONS : GUIDELINES (1/2)



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DESIGN AND LAYOUT

Design and layout should be stateof theart, equipped withmechanical/electrical facilities of international standardsThe layout should allow smooth flow of containers, cargo and vehiclesthrough the ICD/CFS and it should take into account initial volume ofbusiness, estimated volume in 10 years and the type of facilitiesexporters would require

EQUIPPING CFD/ICD

The ICD/CFS should plan for the most modern handling equipmentfor loading, unloading of containers from rail flats, chassis, theirstacking, movement, cargo handling, stuffing/de

stuffingPlayers interested to set up a rail based ICD must haveinfrastructure facilities including land, track, handling equipment forcontainers, maintenance of assets including track, rolling stock, etc.An uptodate inventory control and tracking system to locatecontainers/cargo

III.PRE-REQUISITES & REGULATIONS : GUIDELINES (2/2)



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PROPOSALSThe Inter-Ministerial Committee considers and clears on merits the proposals for setting up ICD/CFSState Governments/Customs/Portsview will also be taken as and when needed

APPLICATIONApplication accompanied by 10 copies of feasibility reports should be submitted in enclosed form to the

Infrastructure Division in the Ministry of Commerce, Udyog Bhavan, New Delhi

SECOND COPY OF

APPLICATION

A separate copy of the application is needed to be sent to the jurisdictional Commissioner of CustomsCommissioner of Customs will send his comments to the Ministry of Commerce and the Central Board ofExcise & Customs (CBEC) within 30 daysIf the project is planned in a port town, a copy of the proposal should also be sent to the concerned PortAuthority who would give their comments within 30 days to the Ministry of Surface Transport and theMinistry of Commerce

BEFORE

APPLICATIONFILING

Applicants need to become familiar with the statutory Customs requirements regarding Bonding, TransitBond, Security Insurance and other necessary procedural requirements and cost recovery charges to bepaid before filing the application

III.PRE-REQUISITES & REGULATIONS : APPROVALPROCEDURE OF CFS/ICD & ITS IMPLEMENTATION (1/3)



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ON RECEIPT OF

PROPOSALS

Ministry of Commerce takes action on receipt of the proposal to get comments from jurisdictional Commissioner

of Customs and other concerned agencies within 30 daysA copy of the proposal should also be sent to Zonal Railway Manager, under intimation to the Ministry ofRailways when neededAnother copy of the proposal is to be submitted to the IMC Members for advance actionIMC expanded to take decision within six weeks of the receipt of the proposal under normal circumstances

ON ACCEPTANCEOF

PROPOSALS

A Letter of Intent (LOI)will be issued to the applicant on acceptance of a proposal

On acceptance of LOI, the applicant may initiate steps to create infrastructure

EXTENSION

REQUIREMENTS

The applicant is required to set up the infrastructure within 1 year from the date of approvalMinistry of Commerce may grant an extension of 6 months keeping in view the justification given by applicantAfterward, a report would be submitted to IMC to consider extension for a further 6 monthsIMC may consider extension or it may withdraw the approval granted

AFTER RECEIPTOF

APPROVAL

The applicant need to send quarterly progress report to Ministry of Commerce after receipt of approvalThree formats for sending the quarterly/ annual report needed to be submitted to Department of Commercethrough electronic mode as well as through hard copy




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FINAL CLEARANCE

Final clearance and Customs notification will be issued ONLY after the applicant has put up the required infrastructuremet the security standards of the jurisdictional Commissioner of Customsprovided a bond backed by bank guarantee to the Customsposted Customs Staff after some time from CBEC

VIOLATION OF

CONDITIONSThe approval, which is given initially for 5 years, is subject to extension, or, subject to cancellation in case ofviolation of the conditions of approval

REVIEW Inter-Ministerial Committee may review working of the ICD/CFS




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IX.STRATEGIC







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IV.GOVERNMENT INITIATIVES : INVESTMENT INLOGISTICS INFRASTRUCTURE



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SR. PORT NAME YEAR SUCCESSFULBIDDER

REVENUE SHARE

1 JN PORT TERMINAL 2 1997 P & O Ports (DPWorld)

33.00%

2 CHENNAI PORT (TERMINAL1)

2001 P & O Ports (DPWorld)

37.10%

3 COCHIN PORT 2004 P & O Ports (DPWorld)

33.30%

4 JN PORT TERMINAL 3 2004 APM Terminals Concor

35.50%

5 KANDLA PORT 2006 PSA ABG 48.99%

6 CHENNAI PORT (TERMINAL2)

2007 PSA 45.80%

7 MUMBAI PORT 2007 Gammon

Infrastructure

35.00%

8 ENNORE PORT 2010 Group MaritimTCB

39.99%

9 JN PORT TERMINAL 4 2011 PSA ABG 50.82%(Residing and

to be

Retendered)

IV.GOVERNMENT INITIATIVES : CONTAINER TERMINALPRIVATIZATION



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ICD FACILITIES

9 railway sidings are provided in JN Port for

handling container train

About 51 ICDs offers the JN Port with gatewayconnectivity

About 80% of total ICD traffic is handled at themajor ICDs located in New Delhi, Ludhiana,Sabarmati, Dadri, Nagpur & Hyderabad

CFS FACILITIES

25 CFSs having capacity of 2.48 mn TEUs per yearsupports the JN Port

Around 10 more CFS projects having capacity of 2mn TEUs per year are also coming up

In Apr 1999, Nhava Sheva International Container

Terminal (NSICT), the first PPP Port Project in India,had been commissioned

In Oct 2002, a consortium of Bharat PetroleumCorp. Ltd.& Indian Oil Corp. Ltd had commissioned a LiquidCargo Terminal on Build Own Transfer (BOT)basis

In Sep 2002, JNPT had commissioned ShallowDraught Berths to handle feeder containervessels and dry bulk cargo vessels

In Aug 2004, JN Port had signed an agreementwith Maersk

CONCOR consortium (GatewayTerminals India Pvt. Ltd.) to convert a BulkTerminal into a 3rd. Container Terminal on a

BOTbasis which became fully operational inOct, 2006

IV.GOVERNMENT INITIATIVES : LOGISTICS SUPPORT ATJNPT PORT INDIAS LARGEST CONTAINER PORT



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PROJECTS TILL 2020

DEEPENINGOF

CHANNEL /BERTHS

ETC.

CONSTRUCTION/

RECONSTRU

CTION OFBERTHS /JETTIES

ETC.

PROCUREMENTOF

EQUIPMENTS

ETC.

RAIL /ROAD

CONNECTIVITY

WORKS

OTHERWORKS TOTAL

OngoingProjects

No. of Project - - 3 2 6 11.0

EstimatedCost.

(INR bn)

- - 1.5 4.0 1.9 7.4

Phase I

(2010

2012)11th5 yr.

Plan

No. of Project 1 2 1 1 7 12.0

EstimatedCost.

(INR bn)

8.0 47.0 1.1 2.8 35.8 94.7

Phase I(20122017)

12th5 yr.Plan

No. of Project - 1 5 1 3 10.0

EstimatedCost.

(INR bn)

- 26.0 1.9 0.5 90.2 118.5

Phase I(2017

2020)13th5 yr.

Plan

No. of Project - - 1 - - 1.0

EstimatedCost.

(INR bn)

- - 0.2 - - 0.2

TotalProjects(Ongoing+ New)

No. of Project 1 3 10 4 16 34.0

EstimatedCost.

(INR bn)

8.0 73.0 4.7 7.3 127.8 220.8

JNPT shall be raising bonds aggregating to Rs. 2,000 crores in FY13

IV.GOVERNMENT INITIATIVES : PLANNED INVESTMENTSON PROJECTS JN PORT (2010-2020)



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CONTAINERTERMINAL

BERTH EXTENSIONDEDICATED

FREIGHT CORRIDORDEEPENING AND

WIDENING

4th Container Terminalwill be developed onDesign, Build, Finance,Operate, Transfer(DBFOT) basis

Phase I:Length 1,000 MtrsCapacity 2.4 mn TEUsCost: INR 40.6 bn

Phase II:Length 1,000 MtrsCapacity 2.4 mn TEUsCost: INR 26.4 bn

5th Mega ContainerTerminal at Nhava

Island with capacity of 10mn TEUs at planning stage(source : The EconomicTimes 13/2/2013)

Project of extension ofberth by 330 mtrstowards North byDBFOT basis withestimated cost of INR 6bn to increase capacity

by 0.8 mn TEUs p.a.

Already awarded

Deepening andwidening of MumbaiHarbour and JN Portchannel is in theProcess

Phase

IVessels upto 14 mdraught (ie.6000TEUs)using tidal window canbe handledEstimated cost: INR13.47 bnAssuredDepthbasisdredgingExpected completion by201314

With an estimated costof INR 281.81 bn, thegovernment hasapproved the dedicatedmultimodal high axleload freight corridor in

the Eastern andWestern corridors

Study being undertakenfor 4 more freightCorridors in high freightdensity area of GoldenQuadrilateral (6,000 kms)

IV.GOVERNMENT INITIATIVES : EXPANSION PROJECTS JN PORT (1/2)



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CONTAINER HANDLINGEQUIPMENT

ROAD CONNECTIVITY PORTBASED SEZ

Additional containerhandling equipment willbe acquired

New 3 Rail MountedQuay Cranes (RMQCs) asreplacement of old 3RMQCs of 1989 wascommissioned in Aug2011

3 Super Post PanamaxRMQCs for MCB and

shifting of old RMQCsfrom MCB to SDB is to becommissioned

Special Purpose Vehicle(SPV) is formed withNational HighwaysAuthority of India (NHAI)

and City and IndustrialDevelopmentCorporation ofMaharashtra (CIDCO) toimprove the roadConnectivity

Estimated cost: INR 35.7bn

Work Completion: about95%

Port Based Multi ProductSEZ will be developed whichhas received its approvalfrom Ministry of Commerce

and Ministry of Shipping inMar, 2010

Phase

1:Area:277 ha on PortslandInvestment: about INR 55bn on PPP basisConsultants : IL&FS IDC

IV.GOVERNMENT INITIATIVES : EXPANSION PROJECTS JN PORT (2/2)



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Deepening and Widening ofMumbai Harbour ChannelandJN Port Channel in PhaseII

Improvement of services atNhava Island area includinga mega 5th ContainerTerminal

Joint Venture withHindustanOrganic Chemicals Ltd.(HOCL)

Tenders fromconsultants across theworld have been invitedfor preparation offeasibility report, detailedproject report andproviding PMC services

Tenders from across theworld have been invited bythe port for appointmentof consultants forstudying feasibility,preparation of master planand DPR for the 5thContainer Terminal

Duration of theassignment: 2 yrs and 3months

700 acres of M/s. HOCLland to be developed asSEZ, FTWZ, ICD etc.

HOCLs land is 30 kmsfrom port and is connectedby road and rail with JNPT

IV.GOVERNMENT INITIATIVES : PROJECT IN PROGRESS JN PORT



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IV.GOVERNMENT


IX.STRATEGIC



X.EXECUTIVE SUMMARY(PAGES)




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AUTOMATIC ROUTE (AR)

GOVERNMENT ROUTE (GR)

Foreign investors do not need any approval fromReserve bank of India or Government of India

Foreign investors need to take prior approval fromGovernment of India through Foreign investmentpromotion Board (FIPB) for all activities notincluded in AR

ROUTES OF FOREIGNINVESTMENT IN INDIA

ROUTES PERMITTED AND EXTENT OF FDI ALLOWED IN PORTS & HARBOURS SEGMENT (EFFECTIVEFROM APR 1, 2010)

TYPES OFINDUSTRIES

APPROVAL ROUTE RESTRICTIONS

Ports and Harbours Automatic Route with 100 FDIallowance

Allowed under the AR for :Leasing of existing assets of portsConstruction and maintenance of assets such as container terminals, bulk /breakbulk / multipurpose and specialized cargo berths, warehousing, CFS,storage facilities and tank farms, carnage / handling equipment, setting up ofcaptive power plants, dry docking, and ship repair facilitiesLeasing of equipment for port handling and leasing of floating craftsCaptive facilities for port based industries

V. FOREIGN INVESTMENT (1/2)



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Investing in Greenfield core infrastructure projects,such as ports

Setting up wholly owned subsidiaries, representativeoffices, project office, branch office or joint ventures

FOREIGN INVESTORS CHANNELFOR ENTRY IN INDIA

WITH 60 DEALS IN 2006

11, PE, M&A (BOTH INBOUND AND OUTBOUND) IN CONTAINER BUSINESS HAS SHOWNA CONSISTENT GROWTH

SOME RECENT INBOUND M&A TRANSACTIONS IN INDIA

ACQUIRER TARGET YEAR SEGMENT

DP World Chennai Container Terminal 2008 Ports

Eredene Capital Ennore Container Freight Station 2008 Ports

Blackstone Group Lp Gateway Rail Freight Ltd 2009 Rail

PSA International Chennai Container Terminal 2010 Ports

RECENT DEVELOPMENTS

Infrastructures Kerala Ltd (INKEL), Bahrainbased VKLGroup and resort chain Mfar Hotels & Resorts Ltd

MIV Logistics Private Limited 2012 New CFS will be setup with INR 650 mninvestment

Mergers & Acquisitions in India

V. FOREIGN INVESTMENT (2/2)



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IV.GOVERNMENT


IX.STRATEGIC






VI MARKET INFLUENCES


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Strong growth Higher margins in comparison with other logistics activities

ROAD

FREIGHT

EXPRES

S

COAST-TO-

COAST

CONTAINER

HAULAGE (RAIL)

CFS/IC

D

MTO

SCENARIOMature Growth Growth

Growth

capitalintensive

Growth

Mature

ENTRYBARRIER

Low High High HighMediu

mLow

GROWTH 510% 2022% 15% 20% 35% 1015%

EBIDTAMARGINS 3

5% 8

10% 25% 30% 40% 4

6%

Firms are keen on capitalizing on the growing demand for ICD/CFS segment and areinvesting towards the same

Between 20152018, 50 more facilities are expected at an investment of INR 75 bn

COMPANY LOCATIONGateway Faridabad, Ludhiana

Allcargo Goa, Bangalore, Nagpur, Hyderabad, Hazira

ConcorRourkela, Durgapur, Kuder, (Gujarat), Madhosingh (Rajasthan), Baddi (HP),Khemli (Rajasthan)

Inlogistics Sahnewal (Ludhiana, Punjab)

RMaritime Hazira, Rewari, Modinagar

VI. MARKET INFLUENCES



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IV.GOVERNMENT


IX.STRATEGIC







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Transport related challenges - In India nearly 61% of the cargo is movedby road, 30% by rail and 9% by airways, pipelines and inland waterways.

This is as compared to a 37% share of road in the USA and 22% in China

Importantrail networks are oversaturated

Rail freight tariffs are high

Transit times are long and uncertain

Rail terminal quality is poor

Lack of flexibility in carrying different types of products

Railway carriage not easy for industries which cannot provide full trainsloads and while road movement preferred to rail, road movement has itsown fair share of issues

VII. KEY CHALLENGES (1/4)



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Inadequate road network coverage

Poor road quality - motorable roads less than 10% of total road network

Expressway network will take time to develop Expandable to 15,000

kms at the end of 13thplan

High level of fragmentation of the trucking industry

Multiple check points

Lack of sustained investment in planned infrastructure such as

warehouse, transport centers, ICDs

State of ICDs/CFSs is poor - Many logistics companies with an interest in

setting up ICDs/CFSs eventually fail to do so, mostly on account of lack of

land available at an appropriate place and at a reasonable price

Existing facilities themselves are plagued with several issues older

facilities are located within city boundaries restricting day movement of

trucks



VII KEY CHALLENGES (3/4)


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Theapproach roads to the facilities are poor making evacuation of cargodifficult

Most facilities have issues of inadequate parking and lack of available landfor expansion, paving, etc.

State of cold storage is poor Estimates on cold chain facilities in Indiaputs the number of cold storage at around 5,400 with a capacity of 24million metric tons. However, nearly 60% of these facilities are meant forstorage of potatoes

Poor electrical conditions increase cost of operation

Multimodal Logistics parks are yet to take off with emergingrequirements of integrated logistics provision of transportation hub,value addition etc., large logistics parks were sought to be developed.

Consolidation of large land parcels is a significant issue hampering theirdevelopment

State of warehousing is poor warehousing costs are 20-25 % of the totallogistics cost. Most warehouses are not leak proof, not equipped withadequate security systems, racking and other facilities



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Theonly really large warehousing owners are government agenciesincluding Central Warehousing Corporation and State Warehousing

Corporation

Focus of a significant majority of the government warehouses is foodgrain storage

Land availability for warehousing at an appropriate place and at an

appropriate price is a concern e.g. Delhi alone has a deficit of 9,000acres of land for development of warehousing facilities

ThePorts sector in India also suffers from several issues:

High turnaround times @JN Port is twice that of Colombo &Singapore due to congestion and slow evacuation

Inadequate depth Costal shipping has not taken off




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IV.GOVERNMENT


IX.STRATEGIC







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VIII. COMPETITION : MAJOR PUBLIC COMPANIES (SUMMARY)


CO OG S CS (CO G


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IV.GOVERNMENT


IX.STRATEGIC







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GREENFIELD ICDs CFSs/ ICDsSUPPLY CHAINMANAGEMENT

Investors should investin greenfield ICDs andexpand existing

facilities as theirdemand is increasingdue to rapid growth ofexport and importcoupled with capacityconstraints inmovement andevacuation of cargo

Investors should grabthe opportunity toinvest in CFSs / ICDs in

India as projectedtraffic indicates theneed for at least 40 to50 new rail/roadICDs/CFS across thecountry in next 5

10years

Investors should investto include Supply ChainManagement (SCM)

functions such aswarehousing, C&F andother value addedservices in the businessplan of ICD with a viewto build MegaLogisticsPark

MODERN LOGISTICCUM

TRANSPORT CENTERS

Using the Public PrivatePartnership model,investors should take

initiatives fordevelopment ofintegrated and modernlogistic cum transportcenters across majorlocations in India Further improvedlogistics operations willsubsist with theintegrated development

of warehousing,transportation andtrafficplanning

IX. STRATEGIC RECOMMENDATIONS : ADVICE FOR INVESTORS


INDIAN CONTAINER LOGISTICS (CONTAINER FREIGHT


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IV.GOVERNMENT


IX.STRATEGIC







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GOVERNMENTINITIATIVES

FUTURESCENARIO

DRIVERS &CHALLENGES

MARKET

X. EXECUTIVE SUMMARY



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Container cargo traffic is estimated to reach 15 mln TEUs by FY16

ICDs handle 60% of containerized cargo vs. CFSs which handle 40% ofcontainerized cargo

Both ICDs and CFSs provide various services such as cargo consolidation,distribution as well as custom clearance activities

There is likely to be a significant rise in the demand for third party

logistic providers driven by industries like automobile, retail, pharma,etc.

Shift in customer activities outside the Port area, higher margins incomparison with other logistics activities, the construction of a dedicatedfreight corridor are all responsible for driving growth in the

containerized cargo sector

Logistics sector is evolving rapidly and its growth is dominated by theinterplay of infrastructure, technology and new types of serviceproviders

X. EXECUTIVE SUMMARY (1/5)


( )


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The challenges in the sector remain (a) the costs entailed for thedevelopment of a facility, (b) archaic procedures for the movement ofcontainerized cargo, (c) competition from the unorganized sector and, (d)changing government policies on taxation

The Government of India has undertaken various initiatives whichinclude investment in logistics infrastructure (Maritimes States & portsin India, container traffic at Indian ports, logistics support at Indiaslargest port, planned investment and future expansion in projects at JN

Port until 2019-20). The Government is also involved in formulating andchanging government policies on taxation related to the sector



(3/ )


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The development of CFSs/ICDs has benefited players in theindustry, importers, exporters as well as port authorities

Port authority receives ready

toload

containers thereby raisingports

productivity and profitability

Allows exporters andimporters to lower inventory

costs

Linkage to the port by railresulting in quick transit and

low transportation costs

Ownership/operation by apublic

or private company providesservices at competitive rates

Consolidation of cargo hasallowed for the making of alogistics hub for LCL cargo

Exporter/Importer,Custom HouseAgent, shippingcompanies use

ICD/CFS facilities



X EXECUTIVE SUMMARY (4/5) ESTIMATED INVESTMENT


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TYPE OFINFRASTRUCTURE

ESTIMATED NOS./DEMAND IN NEXT 510

YEARS

ICD/FTWZ 50 nos.

AIR CARGO CENTRES 150,000 sq. m.

AGRO WAREHOUSES 35 mln M.T.

INTEGRATED

TRANSPORT CENTRES

15 nos.

X. EXECUTIVE SUMMARY (4/5) : ESTIMATED INVESTMENT FUTURE SCENARIO



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X. EXECUTIVE SUMMARY (5/5) : ESTIMATED INVESTMENT FUTURE SCENARIO



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THANK YOU

CONTAINER LOGISTICS (CONTAINER FREIGHT STATION &INLAND CONTAINER DEPOT) SECTOR

Documents

Container Logistics Sector - Tarragon Capital Advisors