Busi­ness Out­look 2013

Af­ter wit­ness­ing a flat 2012 in terms of growth and prof­itabil­ity, the cargo and lo­gis­tics in­dus­try in In­dia is hop­ing for bet­ter re­sults in 2013, thanks to the re­cent de­vel­op­ments in the In­dian econ­omy and pos­i­tive ini­tia­tives from the government. Car­got

Cargo Talk - - Cover Story - RATAN KR PAUL

Ac­cord­ing to Anil Gupta, 2012 has cer­tainly been a bad year for both EXIM and domestic busi­ness for the lo­gis­tics in­dus­try. In EXIM, pri­mar­ily it is linked to the per­for­mance of ex­port sec­tor in which the ship­ments have shrunk by around 6 per cent to 189 bil­lion USD in first 8 months of the cur­rent fi­nan­cial year. This has cre­ated heavy mis­match be­tween con­tainer­ised im­ports and ex­ports, lead­ing to a sit­u­a­tion where lines are be­gin­ning to take the hard op­tion of destuff­ing the im­ports at the ports it­self. Re­sul­tantly, hin­ter­land pen­e­tra­tion of con­tain­ers is go­ing down. How­ever, Gupta felt that the domestic cargo move­ment would get a fil­lip con­sid­er­ing the healthy growth in the In­dex of In­dus­trial Pro­duc­tion (IIP) which has risen to a 16 months high of 8.2 per cent in Oc­to­ber 2012.

Ra­jiv Kochhar - For World Win­dow In­fra­struc­ture and Lo­gis­tics (WWIL), the year 2012 started with good over­all busi­ness fol­lowed by a lit­tle down­fall in im­ports in the sub­se­quent months. That time, the ex­port vol­umes were on a higher side. In last few months, when the im­ports have picked up, the ex­port vol­umes were fac­ing a lit­tle down side. “Such de­vi­a­tions in cat­e­gory spe­cific vol­umes are a part of sup­ply chain lo­gis­tics busi­ness and we take them as a chal­lenge and are striv­ing for growth in busi­ness. Over all, at ICD Loni, 2012 has been good in terms of busi­ness and ser­vice lev­els. We have at­tained more vol­umes in com­par­i­son to last year and our monthly av­er­age vol­umes have also in­creased,” said Kochhar.

Ac­cord­ing to Shan­tanu Bhad­kamkar, 2012 was flat in terms of growth. “We saw de­cline in air cargo but over­all we ex­pe­ri­enced nom­i­nal de­cline or only a nom­i­nal growth in each ver­ti­cal,” he said. In his opin­ion, the chal­lenges about main­tain­ing the profit level were more se­ri­ous than vol­umes as yields are un­der pres­sure. In ad­di­tion, the timely re­cov­ery of dues at the con­trac­tual date was even a more se­ri­ous prob­lem.

Vishal Sharma - For Gate­way Rail Freight, 2012 was a tough year, es­pe­cially Q2 & the 1st half of Q3 when de­mand slumped across all cat­e­gories, for both im­ports and ex­ports. This, com­bined with struc­tural im­bal­ance at ports, ag­gra­vated the prob­lem for CTOs like it. Ac­cord­ing to Ravi Kan­nan, “The year 2012 was tough for the In­dian econ­omy as a whole, but we have crossed im­por­tant mile­stones as pro­jected in the be­gin­ning of the year. In the coming year, we wish to fight and spear ahead of what we have achieved so far.” Ac­cord­ing to Suresh Bansal, lo­gis­tics and trans­port in­dus­try has suf­fered the most in 2012. While busi­ness grew for most of the com­pa­nies, the real hit was bot­tom­line. Due to tremen­dous and re­peated in­crease in fuel sur­charge by the air­lines, fol­lowed by petrol and diesel hike, op­er­at­ing costs for the in­dus­try shot up. “It is al­most im­pos­si­ble to go to cus­tomers again and again and ask for price re­vi­sions. This has re­sulted in fall of prof­its for most com­pa­nies in 2012,” he said.

S Krishnan, how­ever, stated that the ex­press lo­gis­tics in­dus­try wit­nessed growth of over 20 per cent in terms of vol­ume, while the rev­enue num­bers should close at 15 per cent. In­diaon­time is in­vest­ing USD 1.5 mil­lion in 2012-13 keep­ing in mind the ex­pected pos­i­tive trends in the third quar­ter of 2013.

Pankaj Dogra in­forms that for Wal­le­nius Wil­helm­sen Lo­gis­tics In­dia, 2012 has been a good year over­all with a steady growth in both its ocean and in­land seg­ments. “Ma­jor chal­lenges we faced in the year have been in the in­land distri­bu­tion seg­ment, wherein we faced a se­vere short­age of trailer ca­pac­ity for distri­bu­tion of cars for Re­nault and Nis­san. The ca­pac­ity short­age re­sulted from the pro­duc­tion dis­rup­tion at Maruti, and fur­ther due to the im­bal­ance / pro­duc­tion vari­ance be­tween North and South zones,” Dogra in­formed. Ac­cord­ing to Chan­der Agar­wal, 2012 was a chal­leng­ing year for the In­dian lo­gis­tics sec­tor as there was de­mand mod­er­a­tion and de­cline in util­i­sa­tion lev­els. Avail­abil­ity of credit at a very high cost and no ma­jor pro­vi­sion for the in­fra­struc­ture sec­tor in the bud­get forced lo­gis­tics firms to re-visit their busi­ness models and cut cap­i­tal ex­pen­di­ture plans.

Amit Ba­jaj thinks that the de­pre­ci­a­tion of the ru­pee com­bined with the ar­bi­trary in­creased of fuel sur­charges by the air­lines has made ex­is­tence in domestic air cargo mar­ket tough. “We hope the fuel sur­charges sta­bilise in 2013. This would help the in­dus­try to ab­sorb and cre­ate a plat­form for fu­ture growth. The fuel sur­charges of the air­lines should be in­dexed to the ATF rates rather than the ar­bi­trary in­creases,” he de­manded.

Op­ti­mism runs high for 2013

Gupta was op­ti­mistic about the re­vival of In­dian econ­omy in 2013 as is be­ing fore­casted by many econ­o­mists and trade an­a­lysts. “The healthy growth will cer­tainly have a pos­i­tive im­pact on the cargo in­dus­try spe­cially if the growth is there in agri­cul­ture and man­u­fac­tur­ing sec­tors both of which yield good vol­ume of cargo and have good busi­ness po­ten­tials for lo­gis­tics in­dus­try.

“The econ­omy of In­dia is set to ac­cel­er­ate to 6.5 per­cent in 2013 backed by favourable ex­ter­nal sec­tor de­mand out­look and a pick-up in domestic re­forms, and the econ­omy is fur­ther likely to grow at 7.2 per cent in 2014, com­pared with 5.4 per cent in 2012. The pickup is ex­pected on the ba­sis of re­forms which in­clude al­low­ing FDI in multi-brand re­tail, avi­a­tion, etc.” ob­served

Kochhar. He also pointed out that the ef­fect of in­crease in In­dia’s GDP growth is ex­pected to af­fect pos­i­tively to the growth of con­tainer busi­ness. In­dian government is also putting in sig­nif­i­cant in­vest­ment in lo­gis­tics sec­tor.

“In 2013, go­ing by 2012 ex­pe­ri­ence, most com­pa­nies will fo­cus more on dili­gence and greater busi­ness pru­dence. This in­cludes struc­tural changes to en­sure strict com­pli­ance of KYC norms and var­i­ous ini­tia­tives for se­cured sup­ply chain,” felt Bhad­kamkar. He also added that since in­vest­ments in in­fra­struc­ture will be to the tune of US $ 1 tril­lion, it will help growth in lo­gis­tics sec­tor and make it more ef­fi­cient.

Ramesh Agar­wal high­lighted over 11 per cent rise in bud­getary al­lo­ca­tion on road trans­port and high­ways in FY12. It is an en­cour­age­ment to the trans­porta­tion and lo­gis­tics sec­tor in In­dia which will start show­ing its re­sult by the sec­ond quar­ter of 2013. “Also the con­tri­bu­tion of 3PL in the over­all lo­gis­tics mar­ket is likely to in­crease from 1.5 - 2.0 per cent in 2008-09 to 3.5–4 per cent by 2013-14,” said Agar­wal.

“We ex­pect 2013 to be a bet­ter year vis-à-vis 2012. From trade per­spec­tive, the de­mand has al­ready started re­cov­er­ing and is ex­pected to in­crease at a healthy rate go­ing for­ward,” said Sharma.

Sid­dharth Jairaj ex­pects the first quar­ter of 2013 will be slow but there­after it will grow each quar­ter. “The over­all mar­kets are ex­pected to be slug­gish for 2013. But we ex­pect a bet­ter 2013 when com­pared to 2012,” he said.

Dur­ing 2013, DTDC sees some bright spots. “We are see­ing that man­u­fac­tur­ing ac­tiv­ity has picked up re­cently. If it main­tains its mo­men­tum, we can see a good growth for the lo­gis­tics in­dus­try,” Bansal pointed out. He was of the view that FDI should bring fur­ther cheer to the mar­ket as the in­dus­try will start see­ing some ac­tion to­wards sec­ond half of the year. “We are also hop­ing that the government will work its way around and in­tro­duce GST which will be game changer for the en­tire in­dus­try,” he added.

Shesh Kulka­rni ap­peared to be pos­i­tive about 2013, “I do think the pre­vail­ing trend will change in the first quar­ter and lay a good ground for 2013.” In­dus­trial pro­duc­tion has al­ready seen a mar­ginal in­crease in Novem­ber-De­cem­ber 2012. “2013 will be a sig­nif­i­cant year in the work­ing of UFM. We are do­ing many things for the first time,” he in­formed. Ac­cord­ing to Samir J Shah, the tough times will con­tinue. “How­ever, we have all un­der­gone a lot and come out quite knowl­edge­able and sur­vived. We shall con­tinue the same. The de­sire to excel and grow will still re­main and whether one will be able to do so will be known only at the end of the first quar­ter,” Shah com­mented.

Ashish Ma­ha­jan is ex­pect­ing 2013 even tougher since tar­gets will in­crease in 2013 com­par­a­tively to 2012. In­ter­est­ingly, the year 2012 was con­sid­ered as a tough year Per­fect Cargo is go­ing to close this cal­en­dar year with higher vol­umes and turnover. “We will carry for­ward 2013 with our pos­i­tive ap­proach to­wards growth and success,” he em­pha­sised.

Su­nil Ku­mar Jain is ex­pect­ing a sig­nif­i­cant jump in the man­u­fac­tur­ing sec­tor and the econ­omy as a whole. The GDP will also see good im­prove­ment in 2013. “As 65 per cent of the lo­gis­tic spent is shared by the trans­porta­tion sec­tor it has fur­ther ca­pa­bil­ity to do well. Fur­ther GST on im­ple­men­ta­tion will be­come a ma­jor game changer and would im­prove the gen­eral en­vi­ron­ment for lo­gis­tics play­ers. Though, ini­tially there may be some prob­lems but in the long-run there would be a ma­jor boost to the in­dus­trial en­vi­ron­ment,” Jain ex­plained.

He be­lieves that the government is fo­cussed and in­clined to brave out ma­jor de­ci­sions to boost the eco­nomic growth. “The good thing about In­dian econ­omy is that it is tran­si­tion­ing from ser­vice base to man­u­fac­tur­ing base. The fu­ture would see more scope in ware­hous­ing, cold chain, and 3PL func­tions,” said Jain.

In 2013, Dogra ex­pects some pain in the first six months in terms of in­ven­tory build-up at the dealer side and re­duc­ing de­mand. How­ever, the trends have al­ready started shap­ing up es­pe­cially in the high and heavy seg­ment. “We also fore­see an in­crease in auto ex­ports as the domestic sales in In­dia may not see very high growth. The im­prove­ment in in­fra­struc­ture and Power gen­er­a­tion will fur­ther lead to a pos­i­tive im­pact in the over­all im­prove­ment of out­bound lo­gis­tics in In­dia,” he ob­served.

Prashant Popat ex­pects a steady progress in light of the re­cent government poli­cies and he sees no fur­ther de­vi­a­tions or any U-turns with the pro­posed poli­cies. “We have been wit­ness­ing pos­i­tive mar­ket growth viz GDP and our stock mar­kets. In a nut­shell, we should be op­ti­mistic for a seam­less growth in 2013,” he said.

Dushyant Arya main­tained that the New Year Brings in prom­ises of changes in trans­porta­tion and ware­house busi­ness strat­egy with use of big­ger ca­pac­ity trucks for long haul and more mech­a­nised ware­houses. “We are plan­ning big­ger ware­houses which will help our cus­tomer get bet­ter ac­cess to con­sol­i­da­tion. Re­tail fo­cussed sec­ondary move­ment is also in the 2013 plan,” in­formed Arya.

Chan­der Agar­wal ex­pects lo­gis­tics sec­tor to per­form bet­ter in 2013 if the pol­icy re­forms that are in the pipe­line are in­tro­duced suc­cess­fully. “One of the key pol­icy de­ci­sions that may im­pact the econ­omy and the sec­tor is FDI in re­tail as it will lead to out­sourc­ing of func­tions like ware­hous­ing, pri­mary and sec­ondary trans­porta­tion, in­ter­na­tional lo­gis­tics and other value-added ac­tiv­i­ties to lo­gis­tics firms,” he pointed out.

Ajay Bamel felt that the year 2013 would be very promis­ing for the lo­gis­tics in­dus­try as FDI in re­tail and GST roll out com­mit­ment by government will be the game chang­ers. “Both will help new in­vest­ment and tech­nol­ogy in In­dian lo­gis­tics in­dus­try and there will be a dy­namic change in un­der­stand­ing and ex­e­cu­tion of lo­gis­tics busi­ness and com­pa­nies with re­quired skill set will reap the ben­e­fits,” he said.

Learn­ing and Strate­gies

Concor’s main thrust dur­ing the next year would be on strength­en­ing its in­fra­struc­ture and de­vel­op­ing new ter­mi­nals/fa­cil­i­ties with a view to take ad­van­tage of the PFT pol­icy an­nounced by Rail­ways some­time back. “We are very ea­ger to grow into the area of bulk cargo han­dling in ad­di­tion to the tra­di­tional area of con­tainer han­dling and trans­porta­tion which would be made pos­si­ble by such a strate­gic thrust,” in­formed Gupta.

“I would like to con­sider 2012 as a spe­cial case when de­mand across all cat­e­gories went down at the same time. The best op­tion to safe­guard against such sce­nar­ios is to keep your eggs in mul­ti­ple bas­kets so that you can rely on at least a few cat­e­gories/seg­ments at all times. ac­cord­ing to this phi­los­o­phy, we would want to in­crease our cus­tomer base, our trad­ing cat­e­gories, our op­er­at­ing busi­ness seg­ments etc. In ad­di­tion, cost op­ti­mi­sa­tion within the ex­ist­ing busi­nesses could help you drive through the tough times,” shared Sharma.

Snow­man’s ex­pan­sion plan is on the move and we have reached 27,820 MT ca­pac­ity. The com­pany has planned for new ware­houses in Surat, Bhubanesh­war, Bi­har and Chandigarh to serve tier 2 cities as well.

“We will fo­cus fi­nan­cial pru­dence. We will be com­pelled to weed out un­sus­tain­able (sus­tain­abil­ity in terms of pay­ment cy­cles, prof­itabil­ity and pe­nal­is­ing con­trac­tual con­di­tions) cus­tomers, not with­stand­ing their fu­ture po­ten­tial. This is the right time to re­view the busi­ness models and rev­enue models,” em­pha­sised Bhad­kamkar.

ATC Clear­ing and Ship­ping will open more of­fices and will have more sales ini­tia­tives, in­clud­ing in­ter­na­tional sales. “Equally, we will be very se­ri­ous about re­tain­ing only such cus­tomers, who are sus­tain­able in terms of prof­itabil­ity, fund flow and fair con­trac­tual terms,” added Bhad­kamkar.

“We can no longer fo­cus on only one

area or one mar­ket, we have to be present in var­i­ous ver­ti­cals and in mul­ti­ple mar­kets,” sup­ple­mented Jiaraj.

DTDC is bring­ing new state- of- theart ser­vices to meet lo­gis­tic needs of the E-com­merce in­dus­try and start ware­hous­ing and distri­bu­tion busi­ness in 2013.

“We have al­ways felt that, it is im­por­tant to keep rein­vent­ing your­self and some­times such acts are driven by self-dis­ci­pline or by mar­ket con­di­tions. For us, it is both. We took some tough steps, par­tic­u­larly say­ing no to clients who only wanted large cred­its. We have walked away from many such busi­nesses and it was a huge learn­ing un­der tough con­di­tions, par­tic­u­larly when we are a start up,” shared Kulka­rni.

“We need to work for our­selves. Stop in- fight­ing be­cause the same ben­e­fits only the ex­porters and im­porters who take un­due ad­van­tage of our com­pet­i­tive spirit. We need to also re­ar­range our of­fices es­pe­cially to deal with tax­a­tion and the com­plex is­sues that are crop­ping up. The As­so­ci­a­tions will have to be more vig­i­lant and as­sist their mem­bers on a war foot­ing.

NECC is plan­ning to ex­pand its net­work in 2013. The com­pany is also in­vest­ing in its ware­hous­ing projects and fleets. “We would be strength­en­ing our client spec­trum and would be strate­gi­cally as­so­ci­at­ing with good com­pa­nies in the FMCG, Auto In­dus­try, Re­tail, Pharma and other ma­jor in­dus­tries. Key con­cen­tra­tion will also be on tech­ni­cal upgra­da­tion and qual­i­ta­tive im­prove­ment with fo­cus on con­sumer in­ter­est,” in­formed Jain.

Ac­cord­ing to Ramesh Agar­wal, the re­quired pace of ef­fi­ciency and qual­ity im­prove­ment will de­mand rapid devel­op­ment of ca­pa­bil­i­ties of lo­gis­tics ser­vice providers in the months to come. “This in­dus­try pro­vides lesser pay and pro­gres­sion in­cen­tives com­pare to other in­dus­tries. The lo­gis­tics be­ing a ser­vice ori­ented sec­tor, skill devel­op­ment will emerge as a main ca­pa­bil­ity,” he elab­o­rated.

Dogra, on the other hand, em­pha­sised on cost con­trol. “This is the key mantra which we have learnt and im­ple­mented in 2012 and we would like to carry this for­ward to 2013 and be­yond,” he stressed.

“Tough eco­nomic con­di­tions in 2012 prompted us to re-visit our busi­ness model and re­duce our ex­po­sure to high credit freight busi­ness that doesn’t guar­an­tee re­turns. TCI saw op­por­tu­nity in ad­ver­sity as it worked closely with clients to re­duce cost by op­ti­mis­ing sup­ply chains and in­tro­duc­ing in­no­va­tive new ser­vices,” as­serted Chan­der Agar­wal. TCI has also in­vested in ‘ tech­nol­ogy’ es­pe­cially IT sys­tems, freight soft­ware and lo­gis­tics man­age­ment soft­ware dur­ing the lean pe­riod.

Per­fect Cargo is plan­ning to start off bonded truck­ing by early 2013. Be­sides that the com­pany will ex­pand its num­ber of branches in north and south­ern part of In­dia.

G Balaraju is hop­ing that the cur­rent cri­sis would set­tle down and the in­dus­try will be able to per­form bet­ter dur­ing 2013. “Dur­ing 2012, we have learnt how to or­gan­ise our­selves and man­age dur­ing the econ­omy cri­sis where both busi­ness and liq­uid­ity is a chal­lenge. This ex­pe­ri­ence would take us for­ward when the whole sit­u­a­tion eases out,” he con­cluded.

Ra­jiv Kochhar

VP (ICD Busi­ness), WWIL

Anil Gupta

MD, Concor

Vishal Sharma

CEO, Gate­way Rail Freight

Ravi Kan­nan

CEO, Snow­man

Shan­tanu Bhad­kamkar

MD, ATC Clear­ing and Ship­ping

S Krishnan

COO, In­diaon­time

Chan­der Agar­wal Ex­ec­u­tive di­rec­tor, Trans­port

Cor­po­ra­tion of In­dia

Pankaj Dogra GM, com­mer­cial, Wal­le­nius Wil­helm­sen Lo­gis­tics In­dia

Ramesh Agar­wal Chair­man & man­ag­ing worker,

Agar­wal Movers Group

Sid­dharth Jairaj Di­rec­tor, TVS Dy­namic Global

Freight Ser­vices

Amit Ba­jaj

Di­rec­tor, Mi­tuj Mar­ket­ing

Su­nil Ku­mar Jain

MD, North East­ern Car­ry­ing Cor­po­ra­tion

Samir J Shah Part­ner, JBS Group of

Com­pa­nies

Shesh Kulka­rni

Pres­i­dent & CEO, UFM

Ashish Ma­ha­jan

Di­rec­tor, Per­fect Cargo Movers

Prashant Popat

Di­rec­tor, Velji Dos­ab­hai & Sons

Dushyant Arya

Di­rec­tor, Indo Arya

Ajay Bamel CEO, Transocean Ex­press

Lo­gis­tics

G Balaraju

MD, Sindhu Cargo Ser­vices

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