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Logistics Services Market – India February 2013


Executive Summary Market

• Share of Logistics Services in Total Logistics Market in India was estimated to be c1% in 2011 and is expected to  reach c6% in 2016 • Logistics services accounts for around c% of the total logistics market • Courier, Freight Forwarding, 3PL and Reverse Logistics exhibits significant market potential in India

Drivers

Drivers &  Challenges

Technology Adoption

P M SA

LE

– Global Trade Boom – Rapid Economic Growth & FDI in Logistics   – Growth in Retail Sector – Rise in e‐Tailing  – Increased demand for Consumer Electronics and Durables – Expansion of Auto & Auto Components Sector  Enterprise  Application  – ERP,  eBizNET – SC suite, Vin eRetail  Communication  Technology  ‐ Global  Positioning System (GPS) Tracking

Challenges – Poor Infrastructure – Lack of Skilled Manpower – Warehouse Space Deficit

 Identification Technology – Barcode, RFID  Material  Handling  Technology  ‐ Automated  Guided  Vehicle  System  (AGVS)  ,  Information  directed System

 Software Solution Providing Companies

 Technology Adoption by Leading Players  Major Players

Competition

Player A

Player B

Player C

Player D

Player E

Player F

Player G

Player H

Player I

LOGISTICS SERVICES MARKET IN INDIA 2013.PPT

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•Introduction •Evolution •Market Overview  •Advantages of Services •Segments & Features •Distribution Channel •Role of Regulatory Bodies •Drivers & Challenges •Key Issues •Technology Adoption  •Competitive Landscape •Transactions •Strategic Recommendations •Appendix

P M SA

LE

LOGISTICS SERVICES MARKET IN INDIA 2013.PPT

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Logistics sector primarily deals in transportation and storage  operations and is significantly aided by logistics services  LOGISTICS  SECTOR

TRANSPORTATION

STORAGE

Container Rail Transport

Warehousing

Road Transport

Logistics Park

Express Logistics Coastal Shipping Air Cargo Project Logistics

P M A S

LOGISTIC SERVICES

E L

Inland Container Depot

Container Freight Station

Courier Service

Freight Forwarding

3PL/ 4PL

Cold Chain

Reverse Logistics

Port

Logistics services also include import/export management, customs clearance, clearance, freight forwarding, customer  service, rate negotiation, order processing, assembly/installation, distribution, order fulfillment, reverse logistics,  consulting services that include distribution network planning, site selection for facility location, fleet management,  freight consolidation and logistics audit amongst others LOGISTICS SERVICES MARKET IN INDIA 2013.PPT

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Logistics Services ‐ Segmentation Logistics services has significant business earning potential in business services that require courier; movement of heavy  commodities that require freight forwarding, outsourcing of logistics activities by business houses as well as logistics companies  that boosts 3PL and returns processing that involve key sectors that has built a favorable position for reverse logistics   

Courier Service

Freight Forwarding Services of any kind relating to the carriage,  consolidation, storage, handling, packing or  distribution of the goods with ancillary and advisory  services in connection therewith, including but not  limited to customs and fiscal matters, declaring the  goods for official purposes, procuring insurance of  the goods and collecting or procuring payment or  documents relating to the goods

A Courier is a person or company that is engaged in  transporting, dispatching and delivering messages,  packages and mail at some extra cost

Third Party Logistics (3PL) Third Party Logistics (3PL) involves outsourcing  activities related to logistics and distribution 

P M A S

Courier Service

Reverse Logistics

Process of planning, implementing, and controlling  efficient and cost effective flow of raw materials, in‐ process inventory, finished goods and related  information, from point of consumption to point of  origin, for purpose of recapturing value of proper  disposal

3PL industry includes Logistics Solution Providers  (LSPs) and shippers whose business processes they  support.

Key

E L

Freight Forwarding 

3PL

LOGISTICS SERVICES MARKET IN INDIA 2013.PPT

Reverse Logistics  5


Evolution of Courier Services

P M SA

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1980s

1977

1837

1774

Organized Courier  came into existence 

Introduction of  India Post Office  Act

Courier industry  started gaining  momentum 

Indian Postal System  came into existence

LOGISTICS SERVICES MARKET IN INDIA 2013.PPT

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The logistics market is growing at a CAGR of X% of which c%  is comprised by Services segment Logistics Market Size and Growth

Logistics Market – Segmentation 

INR units

c%

25 20 15 10 5

X6

X% X1

X2

X3

X4

0 20‐‐

20‐‐

20‐‐e

20‐‐e

X5

P M SA

20‐‐e

20‐‐e

E L

a%

b%

A

B

C

Share of Logistics Services in Total Logistics Market in India

20‐‐

20‐‐

20‐‐e

20‐‐e

LOGISTICS SERVICES MARKET IN INDIA 2013.PPT

20‐‐e

20‐‐e

7


Growing business opportunities in India is driving the need  for time bound service  Market Overview – India 

Courier Market Size and Growth – India 

• The courier/ express courier market is highly fragmented  with numerous small unorganized players • The market was valued at INR a units in 20‐‐ and is  expected to reach ~INR f units in FY 20‐‐

INR units 400 300

P M SA

• The market is estimated to maintain a steady growth  rate of around A% between 20‐‐ to 20‐‐ • With over a lakh of pin codes in India, only around  10,000 are  connected by courier service

 It thus makes the lesser known players very significant in the  market as they take upon the responsibility of providing last  mile service for large organized players 

200 100

LE

a

f A% c

b

e d

0

20‐‐

20‐‐

20‐‐e

20‐‐e

20‐‐e

20‐‐e

Revenue Split of Courier Sector 

Express/ Courier Categories in India Government  Administered

India Post

Global Integrators

UPS, FedEx, TNT and DHL

Large Indian  Companies

Regional Players

o%

m%

n% Blue Dart, DTDC, First Flight etc.

Other Small Courier  Companies LOGISTICS SERVICES MARKET IN INDIA 2013.PPT

M

N

O

8


Freight forwarders’ exhaustive understanding of transport  business ensures cost effectiveness for its clients Freight Forwarder • Forwarders offer flexibility with customers  • Able to customize their services to specific requirements because they do not need to fill planes or ships each day • Freight Forwarders have competitive advantage on the human resources front • Many forwarders reward employees based on area level profitability, attracting more quality people to freight forwarding

LE

• Better understanding of cost and effectiveness of transportation business • Forwarders are far less complex because they focus on the basic factors such as sales, terminal operations, procurement of transport  services etc

Factors Favoring Freight Forwarder 

P M A S

• Control of  the  end‐user  customer  as  asset  operating  air  and  container  carriers  increasingly  rely on forwarders wholesaling capacity 

• Flexibility of  services  across  different  carriers  and  modes of transportation

• Ability to  provide  better  supply  chain  information  to customers

• Ability to attract and retain high quality clients due  to higher growth and profitability

LOGISTICS SERVICES MARKET IN INDIA 2013.PPT

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SAMPLE

3PL Providers – Types Based on their Functions Types of 3PL Providers

Based on Transportation • Services extend beyond transportation  to offer a comprehensive set of  logistics offerings • Leveraged 3PL service providers use  assets of other firms • Non‐leveraged 3PLs use assets  belonging solely to the parent firm • Examples: Ryder, Schneider Logistics,  FedEx Logistics, UPS Logistics 

Based on Warehouse/Distribution

• Many have  former  warehouse  and/or  distribution experience • Examples: DSC Logistics, USCO, Exel,  Caterpillar Logistics, IBM

Based on Forwarder

• Very independent  middlemen  with  forwarder roles • Non‐asset  owners  that  provide  a  wide  range of logistics services • Examples: AEI, Kuehne & Nagle, Fritz,  Circle, C. H. Robinson, Hub Group

Based on Financial Issues 

Based on Information

• Provide freight  payment  and  auditing,  cost  accounting  and  control,  and  tools  for  monitoring,  booking,  tracking,  tracing, and managing inventory • Examples: Cass Information Systems,  CTC, GE Information Services,  FleetBoston

• Significant growth and development in  this category of Internet‐based,  business‐to‐business, electronic  markets for transportation and logistics  services • Examples: Transplace, Nistevo

LOGISTICS SERVICES MARKET IN INDIA 2013.PPT

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3PL – Distribution Channel

SAMPLE Transaction

Supplier

Third Party Logistics  Provider

Logistics Services

Transaction

Manufacturer

Third Party Logistics  Provider

Retailer/ Buyers

Logistics Services

LOGISTICS SERVICES MARKET IN INDIA 2013.PPT

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Role of Government: Summary Ensuring  Competitiveness

Laws

P M SA

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Role of  Government

India Post Office  Amendment Bill

Infrastructure Development

Foreign Direct Investment

LOGISTICS SERVICES MARKET IN INDIA 2013.PPT

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Drivers ‐ Summary

SAMPLE Common Drivers

Key

Impact

Global Trade Boom Rapid Economic Growth & FDI in Logistics Growth in Retail Sector Rise in e‐Tailing  Increased demand for Consumer Electronics and Durables Expansion of Auto & Auto Components Sector

Courier Financial Institutions  Dependence on  Courier  Growing Business  of Private Telecom  Sector  Seasonal Business  Upsurge Due to  Occasions

Freight Forwarding Diversification into  Logistics Business Improved  Transportation  Infrastructure

Rising Competitiveness  among Domestic  Companies

3PL High cost of  Logistics in India

Phased implementation of  VAT

Government Infrastructure  Initiatives

LOGISTICS SERVICES MARKET IN INDIA 2013.PPT

Reverse Logistics Government  Concern for  Sustainability Garnering Customer  Satisfaction Growing  Consumerism  among Indians Economic Viability  of Reusing Goods Growth of Pharma Market

13


Reverse logistics is plagued by mismanaged returns, high  distribution cost and retailer‐manufacturer conflicts

SAMPLE

Key Issues

Mismanagement in Segregating  Returns

• Retail outlets and showrooms are often not systematic enough in smoothly  segregating the articles to be sent to manufacturers that leads to loss of time for  reverse logistics service providers

High Distribution  Costs

• Transportation, warehousing, distribution and inventory management are the  major cost components of reverse logistics  • If companies find that total costs associated with reclamation efforts exceed total costs of new materials or products, firms would have no  financial incentive for implementing a reverse logistics system • So it becomes very important for logistics service providers to provide services at  competitive rates

Retailer‐ Manufacturer Conflict

• Conflicts arise between retailers and manufacturers due to reasons involved in  product recall • Retailers perceive that every product damages happen in the process of logistics  or in the production process, so every product demands full compensation • Manufacturers, on the other hand, perceive that recalled products may be  damaged by retailers, so every recalled product should not be given full  compensation • The above factors result in confusion of reverse logistics process initiation

LOGISTICS SERVICES MARKET IN INDIA 2013.PPT

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3PL is witnessing better productivity with rising investments  in A, B, C & new supply chain tools 

Identification Technology

Competitive Advantage

P M A S Communication Technology

Material Handling

• Direct data entry into  computer • Technologies x, Y, Z,  magnetic strip and A  are  used • Used for tracking rail cars  and carton movement 

Enterprise Applications

• IT implementation comprises  mainly ZZ packages • A is one of the most popular IT  tool being used across logistics 

LE

• Communication plays a key  role in logistics business • Ensures speed and  accuracy in customer  service • Helps in bringing in  competitiveness among  service providers

• Loading, unloading and storage of  goods in warehouses • Reduces need of labor force • Automated material handling  becomes useful in areas of  hazardous goods  LOGISTICS SERVICES MARKET IN INDIA 2013.PPT

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Public: Domestic Company – Player A (1/3) Company Information

Offices and Centres – India 

Corporate Address

Player A 5th Road, 6th Street,  City A – 700 xxx

Tel No.

91 22 6679 xxxx

Fax No.

91 22 6679 xxxx

Website

www.playera.com

Year of Incorporation

19‐‐

Ticker Symbol

53xxxx (BSE)

Stock Exchange

Bombay Stock Exchange

Products and Services Category

P M A S

Products/Services

E L

City X

Head Office

Key People Name

Designation

Person A

MD

Person B

CFO

Person C

CEO

LOGISTICS SERVICES MARKET IN INDIA 2013.PPT

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SAMPLE

Public: Domestic Company ‐ Player A (2/3) Financial Snapshot Total Income

INR mn 40,000 30,000 20,000 10,000

28,803.1

Key Ratios

Net Profit/Loss INR mn 34,381.0

35,858.4

3000 2000

20,836.4

1000

0

0

2009

2010

2011

2012

Financial Summary  • The company earned a net profit of INR 2,345.9 mn in FY 2012, as compared to net profit of INR 2,228.7 mn in FY 2011 • The company reported total income of INR  35,858.4 mn in FY 2012,  registering an increase of 4.3% over FY 2011

Particulars Operating Margin Net Margin Profit Before Tax Margin Return on Equity Return on Capital Employed Return on Working Capital Return on Assets Return on Fixed Assets Operating costs (% of Sales) Administration costs (% of  Sales) Interest costs (% of Sales)

• The company reported debt to equity ratio of 0.86 in FY 2012, a  decrease of 1.63% over FY 2011

Leverage Ratios

Market Capitalization (INR mn) Total Enterprise Value (INR mn) EPS (INR) PE Ratio (Absolute)

Value (09/01/2013) xx xx xx xx

2010

2009

‐0.19

8.78%

8.97%

7.61%

8.01%

0.06

6.54%

6.48%

5.76%

6.24%

‐0.15

8.44%

8.58%

7.77%

8.13%

0.48

15.42%

14.94%

13.74%

13.07%

14.71% 13.18% ‐ 50.35% 10973.56% 8.27% 7.95%

13.53%

13.95%

46.22%

36.95%

1.52 ‐11023.91 0.32

8.07%

8.62%

4.55

16.76%

12.20%

19.68%

23.75%

0.19

91.11%

90.92%

92.34%

91.90%

17.24

17.24%

0.00%

6.07%

8.64%

0.03

1.65%

1.62%

0.68%

1.12%

‐48.94%

1.00

1.95

1.82

2.13

‐43.37%

0.26

0.47

0.63

0.83

Cost Ratios

• The company earned an operating margin of 8.78% in FY 2012, a  decrease of 0.19 percentage points over FY 2011

Indicators

2011

Profitability Ratios

Liquidity Ratios

Key Financial Performance Indicators

y‐o‐y change 2012 (2012‐11)

Current Ratio Cash Ratio Debt to Equity Ratio Debt to Capital Ratio Interest Coverage Ratio

‐1.63%

0.86

0.88

0.70

0.52

‐20.15%

0.27

0.34

0.24

0.17

‐3.90%

5.39

5.61

11.27

7.20

35.97%

2.53

1.86

3.39

3.77

3.01%

1.25

1.21

1.39

1.37

36.26%

5.10

3.74

3.59

3.11

‐21677.73%

‐1655.74

7.67

7.97

5.86

2.23%

2.33

2.28

2.37

2.07

Efficiency Ratios Fixed Asset Turnover Asset Turnover Current Asset Turnover Working Capital Turnover Capital Employed Turnover

Improved

LOGISTICS SERVICES MARKET IN INDIA 2013.PPT

Decline

17


Public: Domestic Company – Player A (3/3)  Key Business Segments

Key Geographic Segments

A

B

100%

100%

X

50% 0%

50% 0%

20‐‐

Business Highlights Description  Overview

News

P M SA

LE

X

20‐‐

Recent Transactions

Reverse Logistics

LOGISTICS SERVICES MARKET IN INDIA 2013.PPT

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Appendix

SAMPLE

Ratio

Calculations

Ratio

Calculations

Operating Margin

(Operating Income/Revenues)*100

Current Ratio

Current Assets / Current  Liabilities 

Net Margin

(Net Profit / Revenues) *100

Cash Ratio

Profit Before Tax Margin

(Income Before Tax / Revenues  *100 

{(Cash & Bank Balance +  Marketable Securities) / Current  Liabilities)} 

Debt to Equity 

Total Liabilities / Shareholders  Equity 

Debt to Capital Ratio

{Total Debt / (Shareholders  Equity + Total Debt)} 

Interest Coverage Ratio

EBIT / Interest Expense

Fixed Asset Turnover

Sales / Fixed Assets 

Asset Turnover

Sales / Total Assets 

Return on Equity (ROE)  Return on Capital (ROCE)  Return on Working Capital

(Net Income / Shareholders  Equity)*100  EBIT / (Total Assets – Current  Liabilities)*100  (EBIT / Working Capital) *100

Return on Assets

(EBIT / Total Assets)*100 

Return on Fixed Assets

(EBIT / Fixed Assets) *100 

Operating Costs (% of Sales)

(Operating Expenses / Sales)  *100 

Current Asset Turnover 

Sales / Current Assets 

Administration Costs (% of  Sales)

(Administrative Expenses / Sales)  *100 

Working Capital Turnover

Sales / Working Capital 

(Interest Expenses / Sales) *100 

Capital Employed Turnover 

Sales / (Shareholders Equity +  Total Debt)

Interest Costs (% of Sales)

LOGISTICS SERVICES MARKET IN INDIA 2013.PPT

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Market Research Report : Logistics services market India 2013  

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