Foreign Investors’ view of indian logistics - Charles Antoine
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Foreign investors see Indians and India as being ever optimistic and confident.Optimism was shared widely with the international business community for a decade between 1995 and 2011 as India experienced hyper growth based on deregulation.
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Foreign Investors’ view of indian logistics - Charles Antoine
- 1. FOREIGN INVESTORS’ VIEW OF INDIAN LOGISTICS LoGon Investments - Confidential 8th Express, Logistics & Supply Chain Conclave September 25, 2014 LoGon Investments Gmbh
- 2. FOREIGN INVESTORS PERCEPTION OF INDIA HOW INTERESTED FOREIGN INVESTORS ARE IN INDIAN LOGISTICS? WHY FOREIGN INVESTORS ARE ATTRACTED BY INDIAN LOGISTICS? WHAT KIND OF COMPANIES ARE FOREIGN INVESTORS LOOKING FOR? Oct. 2012LoGon Investments - Confidential THE AGENDA
- 9. 100-DAY REPORT ON PM MODI RESURGENCE OF THE INDIAN GROWTH STORY? CAUTIOUS OPTIMISM IS THE VERDICT
- 11. LOWER-THAN-EXPECTED RETURNS FROM INVESTMENTS, LOW LIQUIDITY AND UNCERTAINLY AROUND GOVERNMENT POLICY AND REGULATIONS
- 13. HOWEVER, FDI SEEMS TO BE BACK
- 14. 28% UP SINCE JAN 1ST 2014
- 15. IPO OVER SUBSCRIBED 60 TIMES RAISES 212 CR RAISES 100 CR SEPT 2014 MAJOR LOGISTICS DEALS
- 16. “ANY MULTINATIONAL SERIOUS ABOUT ITS LONG-TERM HEALTH AND THE SUSTAINABILITY OF ITS GLOBAL EARNINGS OVER THE NEXT DECADE MUST CONTINUE TO TREAT INDIA WITH THE UTMOST SERIOUSNESS” Agility Emerging market Index 2014 Report BELIEF IN THE LONG TERM STORY
- 17. HOW INTERESTED ARE FOREIGN INVESTORS IN INDIAN LOGISTICS?
- 19. TRANSFORMATION OF SUPPLY CHAINS DRIVEN BY CUSTOMER CENTRICITY
- 20. EVOLUTION OF THE LOGISTICS VALUE MODEL
- 21. INNOVATION
- 22. OPTIMISATION
- 24. LoGon Investments - Confidential Logistics services Multimodal freight management Industrial projects Cold chain solutions Container terminals (CFS and ICD) Warehous- ing & distribution WHAT LOGISTICS SERVICES?
- 25. TRACK RECORD OF GROWTH AND PROFITS MINIMUM SCALE VOLUMES / OFFICES / STAFF IT SYSTEMS SHARED OPERATING SYSTEM ACROSS BRANCHES ERP IN BEST CASES GEOGRAPHICAL REACH REPUTATION AND GOVERNANCE CLEAN ETHICAL TRACK RECORD SEVERAL YEARS OF PRESENCE ON THE MARKET CLEAR LEGAL STRUCTURES FIRST: HEALTHY BASE
- 26. STRONG USP PROPOSITION POSITIONED TO CAPTURE UPCOMING EVOLUTIONS I.E. INTEGRATED LOGISTICS SOLUTIONS MULTI-USER CONTRACT LOGISTICS VALUE ADDED WAREHOUSING SPECIALIZED INDUSTRY SOLUTIONS TIER II AND III CITY EMERGENCE USE OF CLEANTECH POTENTIAL FOR EXPANSION OUTSIDE OF INDIA WHILE ABLE TO PRICE ITSELF IN THE MARKET SECOND: UNTAPPED POTENTIAL
- 27. SUSTAINABLE EARNINGS BALANCED CUSTOMER BASE WITH NO CUSTOMER WEIGHTING MORE THAN 20% CUSTOMER RETAINED BY QUALITY OF SERVICE, NOT PERSONAL RELATIONSHIP SUSTAINABLE SERVICES (OPERATIONAL EXCELLENCE) PROCESSES, CERTIFICATIONS, KPIS SUSTAINABLE MANAGEMENT TEAMS, NOT ONE-MAN-SHOWS SHARED VALUES THIRD: SUSTAINABLE ORGANISATION
- 28. FINANCIAL INVESTORS WANT AN EXIT MINIMUM IRR OF 20%, GENERALLY AFTER 5 YEARS SELL TO A STRATEGIC OR A FINANCIAL PLAYER STRATEGIC PLAYERS WANT • COSTS SYNERGIES • REVENUES SYNERGIES FOURTH: HIGH RETURN POTENTIAL
- 29. Values discrepancies (corp./family) Unrealistic valuation expectations No willingness to accept dilution or sale Weak appetite for operational excellence Unclear business plans and strategies Related party transactions, Poor control systems, Tax risks Poor organizational culture WHAT INVESTORS GET?
- 30. CASE STUDY: CRITICALOG INDIA PVT LTD
- 31. CRITICALOG CRITICAL CARGO : • Time sensitive • Value sensitive - Precious or High value (up to INR 6 Crore / Consignment) • Temperature sensitive: 15- 25°C / 2-8°C / (-) 18°C • Delicate or non- replaceable • Hazardous
- 32. CRITICALOG
- 33. CRITICALOG CRITICAL SOLUTIONS are crafted around: • Domestic & International air movements • Bonded or standard warehousing • Customs clearance • Fiscal representation • Customized & value added logistics services CUSTOMIZED CRITICAL EXPRESS AIR VALUE ADD CHA WHS
- 34. WRAP UP
- 35. FOREIGN CAPITAL IS VASTLY AVAILABLE TO SUPPORT SOLID LOGISTICS BUSINESSES
- 36. PREFER FOREIGN INVESTORS IF YOU SEEK INTERNATIONAL EXPANSION (M&A) INTERNATIONAL KNOW HOW MNC CUSTOMERS INTERNATIONAL SELL-OUT PREFER INDUSTRY FOCUSED FUNDS IF YOU SEEK STRATEGIC INPUT, OPERATIONAL IMPROVEMENTS NETWORK EXPANSION. WHY CHOSE AN INTERNATIONAL FOCUSED FUND?
- 37. THANK YOU LoGon Investments - Confidential LOGON INVESTMENTS GMBH
Editor's Notes
- Pleasure to be back in Delhi. Come to India for the last 10 years. Earlier as the executive of a European Freight Forwarder, today as an Investor focusing on the logistics industry. LOGON INVESTMENTS IS A INVESTMENT FIRM BASED IN ZURICH SWITZERLAND IT IS THE OFF-SHOOT OF A FAMILY OFFICE WITH ANCHOR INVESTMENTS IN THE LOGISTICS INDUSTRY EXCEEDING USD 1 BN IN REVENUE LOGON INVESTMENTS IS DEDICATED TO LOGISTICS INVESTMENTS IN INDIA SINCE 2012. IT SEEKS VC DEALS IN THE LOGISTICS AND SUPPLY CHAIN SECTOR WITH TICKETS BETWEEN 1 AND 5 MN USD.
- Foreign investors see Indians and India as being ever optimistic and confident. INDIA IS ABOUT GROWTH AND SCALE 1.25 BN PEOPLE WITH AN AVERAGE AGE OF 27 YEAR OLD AND A MIDDLE CLASS OF 160 MN. Optimism was shared widely with the international business community for a decade between 1995 and 2011 as India experienced hyper growth based on deregulation.
- The question was then if the Indian Tiger could outpace China
- India got trapped in a spiral of HIGH FISCAL DEFICITS HIGH INFLATION CURRENCY DEPRECIATION GDP GROWTH DECLINED Enough for the business community to change it’s sentiment over India and conclude that the magic was over.
- As many Indians, Foreigners viewed MrModi as a possible saver.
- Because he meant better business.
- 100 days after the elections GDP QUARTERLY GROWTH UP (GDP grew 5.7% on the 2nd quarter of 2014) In case of other transport sectors, passengers handled by the civil aviation: growth of 7.5% cargo handled by the civil aviation: 6.2% and cargo handled at major ports: 4.3% 2. Inflation is down: Consumer Price InDEX sets inflation at 7.8% in AUG 2014 3. Fresh stimulus in indian foreign policy 4.FOCUS on INFRASTRUCTURE DEVElopment reviving the Special Economic Zone (SEZ), streamlining the Public Private Partnership (PPP) models and creating Infrastructural Investment Trusts (InvITs). BUT No BIG BANG / NO BIG TICKET ECONOMIC REFORMS YET LAND ACQUISITION ACT / GST VERDICT IS CAUTIOUS OPTIMISM.
- lower-than-expected returns from investments, low liquidity and uncertainly around government policy and regulations A large number of PE funds have invested aggressively at high valuations over the last 4-5 years and find it difficult to exit their investments with the desired returns. USD denominated funds have to account for a double digit % depreciation of the Indian Rupee A lot of them are “ IN THE DOGHOUSE”
- FIRST THEY GOT CONCERNED BY THE MACRO PICTURE OUTFLOW OF CAPITAL: 2013 saw an outflow of capital prompted by concerns that the U.S. Federal Reserve was set to tighten U.S. monetary Policy. 2. SHRINKING DRY POWDER LPs have come to be dissatisfied with India’s performance over the last few years. PE asset allocation to India has declined in recent times, India-focused fund allocation – excluding real estate and infrastructure – dropped by 40% IN 2013 In a survey conducted with LPs by BAIN LPs were asked are asked every year How do you rank India’s attractiveness as a market on a scale of 1 to 10 in comparison to other emerging markets? India has been slipping down, loosing favor as other investment opportunities arise in Africa and CEE regions. Reason: Weaker future growth prospect lower potential returns
- BUT NOW FOREIGN INVESTORS SEEM TO BE COMING BACK
- AT LEAST IMPROVING THE LEVEL OF LIQUIDITY ON STOCK MARKETS
- SNOWMAN 2014: Rev 155 Cr, PAT 23 CR IPO OVER SUBSCRIBED 60 TIMES (Rs 1900 Cr worth of bid as against actuaL size of 153 Cr) ALL 3 COMPANIES ARE BRIDGING A SERVICE GAP
- NOW THEY SEEM TO BE COMING BACK There is still a wash of funding available from foreign investors who believe in the long term story of India and who are ready to take risks.
- WHAT SECTORS ARE EXPECTED TO BE ATTRACTIVE FOR PE/VC INVESTMENTS OVER 2014 and 2015 Logistics is not the most attractive sector for PE and VC investments. Healthcare, Technology and consumer products are favored. But Distribution and Logistics is one of the core sectors that Investors see as attractive in the next 2 years. See it as more attractive than real estate, telecom or energy.
- CUSTOMER CENTRICITY IMPACTS SUPPLY CHAINS: CONSUMERS HAVE MOVED FROM LOYAL, PREDICTABLE, UNAWARE, DRIVEN BY AVAILABILITY, WAITING IN LINE TO FICKLE, UNPREDICTABLE, SOPHISTICATED (IN THE KNOW), DRIVEN BY VALUE, IMPATIENT.
- SERVICE INTEGRATION NOW STILL LARGELY UNORGANIZED WAREHOUSING REVENUE MODELS STILL PER SQUARE FOOT IN CUSTOMER DEDICATED WAREHOUSES
- INEVITABLY CHANGES THAT HAPPENED IN DEVELOPPED COUNTRIES WILL HAPPEN IN INDIA USE OF TRAILERS. WHY NOT HAVE 1 TRACTOR FOR 3 or 4 TRAILERS TO OPTIMIZE THE PRODUCTIVITY OF ENGINS AND DRIVERS? 2. MULTI-USER WAREHOUSING WHY RENT A 5000 SQF WAREHOUSE WHEN YOU HAVE A SEASONAL BUSINESS AND YOU ONLY NEED 2000 SQF 9 MONTHS OF THE YEAR? WHY STACK CARGO ON THE FLOOR UNDER A 5 METER HIGH ROOF IF YOU CAN STORE 3 TIMES MORE WITH RACKS? tall designs, modular racking systems, palletization, and the use of automation are still the exception. PER PALLET POSITION REVENUE MODELS ARE STILL NOT WIDELY ACCEPTED 3. OUTSOURCING OF LOGISTICS FUNCTIONS WHY KEEP INHOUSE LARGE LOGISTICS TEAM TO EXECUTE FREIGHT MOVEMENTS WHEN YOU COULD OUTSOURCE MORE TO SERVICE SUPPLIERS TO FOCUS ON PLANNING AND OPTIMIZATION?
- INEVITABLY CHANGES THAT HAPPENED IN DEVELOPPED COUNTRIES WILL HAPPEN IN INDIA USE OF TRAILERS. WHY NOT HAVE 1 TRACTOR FOR 3 or 4 TRAILERS TO OPTIMIZE THE PRODUCTIVITY OF ENGINS AND DRIVERS? 2. MULTI-USER WAREHOUSING WHY RENT A 5000 SQF WAREHOUSE WHEN YOU HAVE A SEASONAL BUSINESS AND YOU ONLY NEED 2000 SQF 9 MONTHS OF THE YEAR? WHY STACK CARGO ON THE FLOOR UNDER A 5 METER HIGH ROOF IF YOU CAN STORE 3 TIMES MORE WITH RACKS? tall designs, modular racking systems, palletization, and the use of automation are still the exception. PER PALLET POSITION REVENUE MODELS ARE STILL NOT WIDELY ACCEPTED 3. OUTSOURCING OF LOGISTICS FUNCTIONS WHY KEEP INHOUSE LARGE LOGISTICS TEAM TO EXECUTE FREIGHT MOVEMENTS WHEN YOU COULD OUTSOURCE MORE TO SERVICE SUPPLIERS TO FOCUS ON PLANNING AND OPTIMIZATION?
- DEAL ACTIVITY HAPPENS IN ALL SEGMENTS OF THE LOGISTICS INDUSTRY AT ALL STAGES OF DEVELOPMENT SOME LIKE ASSET HEAVY (SECURITY), OTHERS ASSET LIGHT COMPANIES (HIGHER ROIC) SOME LIKE MINORITY STAKES OTHERS CONTROLLING PERCENTAGE SOME LIKE THEM DISTRESSED OTHERS IN FULL HEALTH FACTORS THAT CAN INFLUENCE THE INVESTMENT CYCLE: regulatory changes Technology evolutions
- HOWEVER, WHAT INVESTORS LOOK FOR IS A GOOD INVESTMENT PROFILE COMPANIES THAT HAVE HEALTHY BASE FOCUSED ON UNTAPPED POTENTIAL SUSTAINABLE BRINGING RETURN
- Costs SYNERGIES Overhead Merging of back offices Increase of buying power with carriers Merging of overlapping locations Revenues SYNERGIES Merging of volumes Opening of new services Cross selling of customers
- INDIAN TRANSPORTATION AND WAREHOUSING COMPANIES ALL FOCUS ON GENERAL CARGO AND GO AFTER VOLUMES. CRITICALOG IS EXCLUSIVELY INTERESTED IN CRITICAL CARGO DEFINED AS HIGHLY TIME SENSITIVE, HIGHLY VALUABLE, TEMP CONTROLLED OR DANGEROUS. IT IS EXCLUSIVELY PROVIDING PREMIUM TRANSPORTATION AND WAREHOUSING SERVICES TO HANDLE CARGO THAT IS NOT PROPERLY HANDLED BY STANDARDIZED GENERAL CARGO NETWORKS AND REQUIRES SPECIAL AND EXPRESS ATTENTION DUE TO ITS VALUEABLE, PERISHABLE, OR DANGEROUS NATURE.
- AS SUCH IT IS SERVICING: SPARE PARTS IT INDUSTRY AEROSPACE AUTOMOTIVE PRECISION ENGENEERING TEMPERATURE CONTROLLED CARGO HEALTHCARE LIFE SCIENCE CHEMICAL HIGH VALUE HIGH END / LUXURY RETAIL JEWELERS AND WATCH BUT AS AMATTER OF FACT, ALL INDUSTRIES HAVE A PORTION OF CRITICAL CARGO PRODUCTS REQUIRE DEDICATED CARE LAUNCHES OF NEW PRODUCTS NON-REPLACEABLE ITEMS HIGHLY PERSONALIZED DELIVERIES
- Proprietary network of 32 offices in India Warehousing capabilities Customer base: 90% MNCs TAT service performance above competition Strong IT backbone Structured by industry verticals
- If You conclude from this presentation that there are investors outside with bags of money, you are actually right. However to have them invest in your business will require serious preparation
- IF YOU ARE LOOKING FOR FUNDING YOU SHOULD ASK YOURSELF MANY QUESTIONS DO YOU WANT A LOCAL OR A FOREIGN INVESTOR. DO YOU WANT AN INDUSTRY FOCUS OR A SECTOR AGNOSTIC FUND