Research on India_Automotive and Transport Sector in India_January 2012

Automotive and Transport Sector in India

Monthly Update

January 2012

Top Story Air India announces shut down of its cargo business Cash‐broke carrier concern Air India has shut down its loss making arm of cargo business. Further, it has put up its entire fleet of six Boeing 737‐200 freighters on sale. This is primarily done with an objective of cutting down losses and enhancing revenues. In lines with recovery, Group of Ministers is meeting to decide on infusing INR 66 bn to bail out the concern.

Indian Airlines is the possessor of the six 30 year old Boeing 737‐200 freighters which got converted into cargo carriers by AI in 2007 at the plan to launch cargo hub with base in Nagpur. Owing to financial crisis, the plan got discarded and move for selling off the carriers surfaced in 2010. However, it has sold four Airbus A‐310 freighters. This time around it plans to sell eight aircraft engines, four auxiliary power units, aircraft seats and spares along with the six freighters. Additionally, it is providing for lease of five Boeing 777‐200 aircrafts for a period of ten years to source for funds. Moreover, it is marked with the sale and leaseback of first seven Boeing 787 Dreamliners that is due to be received by June 2012. Chief reasons cited for the closure of this business segment include lack of critical distribution network, warehousing facilities, mismanagement and lack of proper infrastructure.

Though Air India was the first passenger airline that entered this segment and prospective market is predicted for future, yet shutting down comes as a big decision from the concern. Selling remains the only option because such vessels are too big for domestic operations and too small from an international perspective. India’s economic condition acts as a deterrent but what is more affecting the segment is lack of proper infrastructure for sound operations. Aided with it is the presence of cash‐ri

ch airlines such as Emirates that come in the way of their progress.

News Update

General Ship repair facility bags attention of 7 companies Cochin Port Trust received attention from 7 companies who aspire to set up a ship repair facility on Willingdon Island. Notable concerns include names like Cochin Shipyard and Bahrain’s Sultan Marine International.

The ship repair facility is a part of Port Trust’s scheme of action in a bid to diversify activities and boost the receding income. It plans to organize the transfer of equipment, dry dock and workshop in equity for the selected operator who will set up

Automotive and Transport – Monthly Update

the new facility on build, operate and transfer basis. The proposed facility will boast of cost advantages in terms of tapping emerging business for ship repair. Further, this market can open avenues for 20,000 jobs in skilled and semi‐skilled categories.

Cochin’s transshipment terminal gets a hit by archaic laws India’s first international container trans‐shipment terminal (ICTT) at Vallarpadam in Cochin port has got affected due to archaic laws and negligence on part of government with regards to certain clearances. This has resulted in halt of the hub’s functioning since 11 months it has started its operations.

The ICTT operates under DP World, owned by the Dubai Government, which won a contract of 30 years to build and operate ICTT. The ICTT operates in a special economic zone (SEZ). Disparity in terms of clarity in procedures between SEZ and customs authorities aided with delay in liberalizing of local shipping law has resulted in null trans‐shipment activity. Figures suggest that since Feb 2011, only 2 mainline services have begun operations, where one refers to service to Europe and the other refers to service to Far East. Further Cabotage laws poses as hindrance to bigger ships calling at ICTT. Due to this particular law, containers are needed to be sent via Colombo which is estimated to incur a cost of INR 10,700 born by the Indian importers and exporters in addition to transit period of 8 days of shipment. The customs administration in India also acts as a deterrent to the port services as Indian port dues or charges are high. Most significantly the legislative conditions do not allow feeder services between Indian ports and foreign flag vessels owing to Cabotage restrictions. However, foreign shipping concerns operating from India are lobbying for relaxation in Cabotage regulations though Indian National Shipowners Association has ruled against any such relaxation.

Conflict between Sical and Ennore over handling coal Two investors at Ennore Port are having conflict with each other over handling coal at the port. Sical Iron Ore Terminals which handles iron ore at its terminal at the Ennore Port wants to handle coal. This has received stark opposition from Chettinad International Coal Terminal which is the developer of coal terminal at the same port.

Individual investors have put in INR 4 bn to develop their terminals. Both are built on a public private partnership basis and were commissioned at the Ennore Port on Jan 28, 2011. Iron ore terminal has witnessed a slump in its operations due to ban on export of iron ore in Karnataka, while Ennore Port witnessed active growth in coal traffic. Sical Iron Ore Terminal has asked for assistance from the Government. However, developer of coal terminal has pointed about the concession agreement which states that no new competing facility will come up within the first few years.


INR 67 bn port deal marked as a gamble for PSA PSA International Pte ltd, world’s second biggest container port operator, has been ailed as taking a big gamble when it raised a record bid last June for a container hloading facility at Jawaharlal Nehru (JN) port. The conglomerate led by PSA had quoted a revenue share of 51% for the INR 67 bn project. This marks a value far higher than that of average revenue share of 35‐40% for such projects. Cargo handling contracts at Union government‐ controlled ports such as JN port are decided on revenue share basis. The incident of bearing the stamp duty as under whose name it would be registered has marked a speculation of a possible pull‐out by PSA. This has been considered as an indication of a quit by the concern after it found that the bid was unfeasible. Further, issues regarding project finance from banks, paying of 8% as lease rent every year to JN port, relocation of a argo jetty run by Bharat Petroleum, additional investment to build roadway to acility and electric sub‐station are some of the impediments that PSA needs to clear. cf GMB to witness enhanced cargo handling capacity by end of fiscal Gujarat Maritime Board (GMB) has anticipated that cargo handling capacity of its ports will reach 323 mn tonnes (mt) by end of the current fiscal year. Further, it is redicted that the ports will handle 500 mt by 2015‐16 and over 1,000 mt by the end pof 2020. Government measures have added to its natural advantages which have helped it to emerge as the top maritime state in the country. A consolidated cargo handling capacity of GMB ports remained at 193.18 mt during Apr‐Dec 2011 compared to 169.95 mt during the same period a year ago. This represents an increase of 13.66% in the current year over 2009‐10. Cargo traffic has also shown an upward trend in ports namely Magdalla, Bedi, Dahej, Sikka and Mundra. Statistics suggest GMB has handled 231‐mt traffic in 2010‐11 which forms 26% of the total cargo handled on a ational basis. This point to a growth of over 12% in traffic handled in 2010‐11 alued at 231 mt as against 205.51 mt traffic handled in 2009‐10. nv Mahindra PE looking to divest stakes Mahindra Partners (MP), the in‐house private equity wing of the Mahindra & Mahindra group is aiming to divest stakes in its firms. Retail and logistics ventures eature under these schemes. It looks to involve partners who has expertise in the ffields and can offer strategic insights and values to the undertakings. MP is a division focused on diverse business such as steel trading, logistics, retail, solar energy and conveyor systems. Mahindra Logistics is aiming at exploring strategic partnerships which will provide it a kind of leverage to go the next level or even acquisitions. It is a 100% subsidiary of Mahindra & Mahindra and is slated to achieve INR 13 bn revenue at the end of FY 2011‐12. Besides, MP has also announced


aOn acquisition of 26% interest in Mahindra Solar One. Another venture, Mahindra cean Blue Boats has deliberated an offering of 49% stake to Ocean Blue.

Kochi Kochi Customs asks for scanners at port gates Kochi Customs has submitted an affidavit before the Kerala High Court asking for installation of scanners at port gates. The petition caters to Kochi Port and India Gateway Terminal where they are seeking sufficient infrastructure and space equired for installation of container scanners and Indian Customs Electronic Data rInterchange System. The Customs has asked the Court to help them to process a demarcation of non‐functioning area at Vallarpadam ICTT in order to discharge their statutory functions. Since the Customs had no hand in the operations of control over the main exit and entry gates at ICTT, its role was limited to verification of seals of imported and exported containers at the inner gates. This has resulted in the escalation of the issue to higher rungs of Development Commissioner, SEZ and Directorate of Logistics in New Delhi. Current procedure of examining allowed containers getting an entry to the CTT. The petition urged the procedure is not a 100% secure method and that too imited to certain selected containers who were checked at the terminal. Il JNPT and Ennore port have postponed plans to issue taxfree bonds JNPT and Ennore are deferring their plans to issue tax‐free bonds till next fiscal. Since hey have no pressing cash requirements and in anticipation that it would be arising tnext fiscal, the two entities have done so. Earlier, both the Centre‐owned ports had proposed to issue tax‐free bonds valued INR 25 bn by March 2012. The break‐up comprised JNPT raising INR 15 bn from sale of bonds while the remaining was planned to be raised by Indian Ports Global. Indian Ports Global was to be set up as a company by Ministry of Shipping to process the acquisition of overseas shipping assets. Currently, with no immediate cash needs aided with expectation of better market conditions with higher interest rates, the entities would go for bond issue next fiscal. UCO Bank collaborates with NCMSL UCO Bank has joined hands with National Collateral Management Services (NCMSL) which is a major agriculture‐infrastructure provider for collateral management and arehousing services. The strategic partnership has an aim to provide financial w


assistance to industries, traders and farmers. The financial assistance would be provided across all level of the supply chain including pre‐harvesting to that of marketing and export stages. UCO Bank will also avail of the premium services such as working capital financing in commodity based industries, especially in the likes of agro‐based industries. This partnership would entail the bank to lessen the credit risk on commodity finance product offerings.

Feurther, it will ensure that opportunities are generated to field functionaries in xtension of finance against warehouse receipts. Water Resources Group processes JV Water Resources Group (WRG) has announced a JV with Mandala Water which is a wholly owned subsidiary of Mandala Capital AG Fund. The JV will help WRG to onsider and make the most use of all its existing and future products and ctechnologies in South Asia. WRG owns 49% in the JV and it will be based in India. This will entail WRG to make a foray into the burgeoning South Asian desalination market covering both industrial and municipal applications. The JV will also look into developing new markets in seed and food preservation and food logistics and facilitate usage of WRG’s Plasma hemical Reactor which helps to produce high quality low cost ozone from ambient ir. Ca News Update

Expansion Plans Integrated logistics hub near Kolkata on Maruti’s radar India’s leading car manufacturer Maruti Suzuki is all set to develop an integrated ogistics hub near Kolkata. The project is estimated to be worth INR 1 bn and will be lspanning across an area of 60 acres located near Panagarh. This project comes after the plan of establishing an INR 800 mn hub at Siliguri. A hub of this stature is supposed to cater to demands of customers from North Bengal and North East region. It is still in its preliminary stage as Maruti has not yet submitted its proposal to the West Bengal Government. As for the Panagarh facility, the company ntends to develop a warehousing facility for 10,000 to 15,000 cars which will boast of ervicing unit, store house for automobile spares and a training facility. is Bharati Shipyard to join hands with Apeejay Group to develop two shipyards Bharati Shipyard, India’s second largest shipbuilder is to tie up with Apeejay Shipping o set up two shipyards on the East Coast of India. The 50:50 JV (joint venture) project t


is slated to be worth INR 40.75 bn. The two shipyards will be well equipped to undertake ship building, ship repair and maintenance activities. One of the shipyards will be located near Dhamra in Orissa’s Bhadrak district and will span across 800 to 1,000 acres land and a facility to build and repair ships of 320,000 GT. Reason behind building two separate yards is primarily to focus on two different segments.

Sidcul to sign an MoU agreement with Concor State Infrastructure & Industrial Development Corporation of Uttarakhand Ltd (Sidcul) will be entering into an MoU agreement with Container Corporation of India td (Concor). This will mark development of 2 logistics hubs in Pantnagar and LHardwar with an estimated investment of INR 3 bn. Sidcul is hopeful that the hubs will connect the state industry with that of eastern Indian Railways. It will boast of facilities like warehouse, truck parking, dormitories, 24‐hour canteen/ restaurant, fuel station, service centres and office complexes. Development of these industrial estates in Pantnagar and Hardwar would ensure logistic supports and amenities to the state industry through these proposed hubs. Sidcul has associated itself with IL&FS to design an exhaustive process management n relation to appointment of developers who will be implementing the projects on ublic‐private partnership model. ip Arshiya International announces launch of FTWZ Indian supply chain and logistics infrastructure solutions concern Arshiya International has announced an operational launch of its 135 acre Free Trade and Warehousing Zone (FTWZ) in Khurja in UP. This will be located at the confluence of the eastern and western corridors of the freight services. FTWZ constitutes a part of Arshiya’s 315 acre mega logistics hub and includes a 50 acre rail siding and 130 acre Domestic Distripark (DDP) which is slated to be functional soon. This is expected to emerge as the flagship state‐of‐the‐art logistics infrastructure in the north to cater to the massive manufacturing belt. It will ensure efficient warehousing, value optimizing and distribution of EXIM and domestic cargo. It falls under the SEZ Act and is going to offer immense benefits to the companies treading in import, export, re‐export and trading activities out of India. While the DDP ill provide an efficient hubbing zone in northern India, the rail siding will facilitate ovement through Rail.

wm Karaikal Port on an expansion drive Karaikal Port, subsidiary of Chennai‐based Marg Limited, is on the verge of involving private equity player. Jacob Ballas Capital is said to be close contender for the project. arg Karaikal Port has already raised INR 3.5 bn from IDFC Project Equity and Ascent M


Capital. The investment drive is for its expansion project. It has sourced investments for Phase 2A expansion of its project. This is slated to increase the port’s capacity from its planned 21 MMTPA to further 28 MMTPA and accounts for an additional capital outlay of INR 6 bn. Jacob Ballas Capital is supposed to be eyeing at a secondary deal and will be obtaining a part of IDFC Private Equity’s stake. Prior to this, IDFC had invested INR 1.5 bn and Ascent Capital has committed INR 2 bn during later half of

2011. The funding will be processed as a secondary round and will be in premium to the investment made by Ascent Capital. The port is said to be developed in three phases and be functional by 2016. Cargo Motors and Israel Ports ink deal to develop Nargol Port A conglomerate of Cargo Motors and Israel Ports has struck a deal to develop Nargol Port in Gujarat. The consortium has plans to invest INR 40 bn with the purpose of eveloping the container terminal port at Nargol. It is also considering options of dbuilding a car terminal on a roll‐on/roll‐off basis facility in future. Cargo Motors holds a 74% equity stake while Israel Ports holds a 26% stake in the joint venture. High waterfront charges of 171% have helped the consortium won the bid. At least two dozen concerns showed interest in the bid including a firm from the Adani Group, Essar Group, Sterlite‐Vedanta union and even Gammon India. However, only four made it to the final round. Nargol is a multi‐purpose port with facility to handle solid, liquid and container cargos. The cost involved in the development of the port is slated to be high as it is 11‐12 meters away from the coastline requiring a lot of dredging. This implies that the developers need to reclaim 75‐15oha of land to set up he port. The project is expected to be completed in phases amongst which the first hase is commissioned to be completed by 2015‐16. tp ICTT Vallarpadam gets its CFS from Gateway Distriparks Gateway Distriparks is setting up a container freight station (CFS) at International ontainer Transshipment Terminal Vallarpadam to augment proper facilitation exim Ctrade in the region. The first phase of the project is slated to begin by March 2012 at the 6.5 acres taken on 30 years’ lease from the Kochi Port. August is considered to be the time for the second phase to get ready. The proposed CFS will boast of warehousing facilities spanning across 25,000 sq ft and storage facilities across 1,000 TEUs. Separate area for Customs authorities for their inspection of cargo on wheels id also provided. The project is estimated to incur an investment of INR 250 mn and will help in lowering the transaction costs for importers and exporters thereby strengthening the trade. News Update Financials TVS Logistics seeks funding from PE concerns Chennai based TVS Logistics Services is seeking for a second round of funding from private equity (PE) investors. However, they are not decided on the amount and stake of the investment.


The concern is looking at raising money from equity market. Around 20 PE investors had approached the firm. Recent developments suggest that it is in talks with 4 players including Kohlberg Kravis Roberts and Temasek. TVS is expecting to raise INR 2650 mn from PE investors through both primary and secondary route. It has aims of expanding its coverage in the domestic market as also in Southeast Asia, Turkey and South Africa. It is also setting its eye on making acquisitions in new and existing markets and is planning to use the additional money on this purpose. Industry Expert Speak Conflict between Sical and Ennore over handling coal – S. Velumani, Chairman, Ennore Port “Chettinad consortium does have an exclusive right to handle all coal traffic, which is not meant for use by the Tamil Nadu Electricity Board (TNEB). But, the iron ore xport terminal is also a common user capacity lying idle. So, something has to be orked out,”

ew Transactions (November 2011 – January 2012)

Date Buyer Target Deal Size (INR mn) % stake Deal Status

Type of Transaction

9th Jan 2012

General Atlantic Fourcee

Infrastructure Equipments

6675 NA Expected Investment

2 c 3rd De2011

SBS Group Atlas Logistics NA 80 Completed Acquisition

1 c 3th De2011

India Equity Partners TNT Express NA NA Expected Acquisition

1 c 2th De2011

Future Supply Chains Solutions

Transmart India

NA NA Completed Acquisition


Annual Financial Results – Revenue (INR mn)

Companies FY ‘08 FY ‘09 FY ‘10 FY ‘11

ABC India Ltd. 1,400.2 1,585.7 1,466.1 2,059.1

ABG Shipyard Ltd. 9,668.4 14,130.0 18,124.4 21,369.0

Allcargo Logistics Ltd. 2 3,140.8 2 0,609.3 2 8,613.4 NA

Aqua Logistics Ltd. 1,089.9 2,134.0 3,220.1 3,808.8

Arshiya International Ltd. 4,011.6 5,033.8 5,258.9 8,215.2

Bharati Shipyard Ltd. 7,048.5 1 0,199.0 13,480.0 16,090.0

Blue Dart Express Ltd. 9,766.6 9,075.4 1 1,499.0 NA

Brahmanand Himghar Ltd. 71.022 66.455 48.855 NA

Chartered Logistics Ltd. 1,058.69 1,356.95 1,235.43 1 ,841.89

Chowgule Steamships Ltd. 1,927.88 2,376.32 910.927 709.85

Container Corporation of India Ltd. 33,644.8 34,524.0 37,306.0 38,924.7

Essar Ports Ltd. 18,424.2 25,830.8 3 0,077.7 13,919.3

Four Soft Limited 1,715.33 1 ,945.93 1,329.6 1,219.06

Gateway Distriparks Ltd 2,723.3 4,520.0 5,180.4 6,012.7

Gati Ltd. 7,168.4 7,904.1 9,261.1 12,094.4

Global Offshore Services Ltd. 943.37 1,632.25 2,124.12 1,968.17

Great Eastern Shipping Company Ltd. 3 6,154.0 4 1,239.3 3 0,755.1 25,850.3

Gujarat Pipavav Port Limited 1,673.2 2,207.1 2,839.3 NA

Mercator Limited 14,768.5 22,105.1 18,087.3 28,316.8

Seamec Ltd. NA 2685.86 * 3,247.21 1,023.76


Shreyas Shipping and Logistics Ltd. 2,901.16 2 ,840.61 1 ,539.87 1,886.91

Sical Logistics Ltd. 7,129.1 6,745.5 7,220.1 NA

SKS Logistics Ltd. 459.34 328.291 294.24 442.25

The Shipping Corporation of India Ltd. 37,446.8 41,843.5 34,935.3 35,671.4

Transport Corporation of India Ltd. 1 2,428.2 1 3,512.6 1 5,225.1 1 8,530.2

Varun Shipping Co. Ltd. 9,451.9 9,146.6 6,852.3 4,946.7

*Change in financial year Annual Financial Results – Income (INR mn)

Companies F Y ‘08 F Y ‘09 FY ‘10 F Y ‘11

ABC India Ltd. 14.9 43.3 8.0 54.9

ABG Shipyard Ltd. 1,606.8 1,711.6 2,181.2 2,047.1

Allcargo Logistics Ltd. 1,077.0 1,299.5 1,659.2 NA

Aqua Logistics Ltd. 56.3 111.5 205.4 223.9

Arshiya International Ltd. 453.8 656.2 983.1 820.1

Bharati Shipyard Ltd. 1,076.5 1,334.8 1,303.5 1,043.8

Blue Dart Express Ltd. 779.6 611.9 947.0 NA

Brahmanand Himghar Ltd. 6.44 0.68 0.68 NA

Chartered Logistics Ltd. 19.52 15.85 40.26 78.21

Chowgule Steamships Ltd. 1,659.98 1,175.67 766.64 276.93

Container Corporation of India Ltd. 7,340.7 7,791.5 7,776.3 8,763.7


Essar Ports Ltd. 2,774.1 772.0 937.7 362.9

Four Soft Limited 50.485 447.25 76.65 30.942

Gateway Distriparks Ltd 735.6 795.8 791.4 967.5

Gati Ltd. 197.8 (186.6) 95.0 141.0

Global Offshore Services Ltd. 371.55 411.49 412.2 222.24

Great Eastern Shipping Company Ltd. 14,533.5 14,178.3 5,127.6 4,687.0

Gujarat Pipavav Port Limited (676.0) (1,163.9) (547.2) NA

Mercator Limited 3,276.6 3,764.5 532.4 940.0

Seamec Ltd. NA 471.213 * 1,419.55 (671.66)

Shreyas Shipping and Logistics Ltd. 69.316 55.86 (157.05) 127.77

Sical Logistics Ltd. 502.1 180.1 (356.3) NA

SKS Logistics Ltd. 26.08 0.77 (81.87) 32.65

The Shipping Corporation of India Ltd.

8,139.0 9,406.7 3,769.1 5,673.5

Transport Corporation of India Ltd. 329.1 332.6 412.7 501.3

Varun Shipping Co. Ltd. 2,275.2 1,240.3 (1,528.8) 147.5

*Change in financial year press articles and company releases.

Events Calendar

US Ports and Maritime Technology Mission to India Feb 20 to 24, 2012 at Chennai, Mumbai and Ahmedabad


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Research on India_Automotive and Transport Sector in India_January 2012

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Transcript of Research on India_Automotive and Transport Sector in India_January 2012