Market Research Report : Project logistic Market in India 2012


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Growing investments in key sectors of the economy is driving the project logistics market in India. Project logistics refers to handling of shipment of over dimensional cargo (ODC) more importantly those that have to be delivered within stipulated time. Such cargo need to be generally transported to remote locations that have accessibility constraints.

The report begins with an introduction section that gives a total overview of the logistics sector and its components. Thereafter, the section provides an elaborate understanding of network logistics that comprises of ‘Temporary Logistics Network’, ‘Permanent Logistics Network’, ‘Flexible Logistics Network’ and ‘Combined Logistics Network’.

The introduction section is then followed by the market overview of the project logistics segment. The section demonstrates the current market size along with forecasted market size and growth rate that would be prevalent in the market till 2016. The section also deals with the cargo transport segmentation by containerization and projects. It also highlights the logistics cost as percent of GDP that is borne by India in comparison with BRICS nations as well as developed nations. It section then elaborates the possible areas of project logistics application.

The next section deals with the implementation of ‘Goods Service Tax’ (GST) in the logistics sector from the erstwhile ‘Central Sales Tax’ (CST) regime and how the transition has not only benefitted the warehousing industry but the entire logistics industry as a whole. This is because any positive impact on warehousing has a roll over benefit on the logistics industry in totality.

The report then deals with the ‘Project Logistics Management’ tool which if implemented in high investment projects can help in systematic handling of projects from initiation to completion. The solution can thus help in efficient resource management and avoid cost overshoot and other related wastage.

The next section deals with some very effective success factors that would enable project logistics companies to earn good business by raising reliability among clients.

Thereafter, the next section deals with issues that are hampering project logistics business. Issues related to transport cost; material handling equipments (MHEs) and technology adoption are decelerating project logistics business significantly.

The report then elaborates the drivers and challenges that the industry is facing in current market scenario. It provides a comprehensive set of factors which boosts and hinders the growth of the market. Some of the key drivers include growth of the energy sector, rise in number of infrastructural projects, demand accruing from mining and automobile sectors and the growing warehousing facilities. The factors hindering the market growth can be summarized to be poor in

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Market Research Report : Project logistic Market in India 2012

  1. 1. Project Logistics Market – India Project Logistics Market IndiaSeptember 2012
  2. 2. Executive Summary • Project logistics refers to the handling of shipments such as heavy transports, ODC and cargo  experiencing time, security and location constraints Market • The project logistics market is currently valued at INR x1 units and is expected to reach INR x6 units by 2016 Drivers Challenges  Growth in energy sector  Poor quality infrastructure  Rising number of infrastructure projects  Project delays slowing down project logistics  Drivers &   Demand accruing from mining sector sector  Growing logistics demand from   Lack of skilled manpowerChallenges automotive sector  Difficulty in permits attainment and   Growing Warehousing Facilities unfriendly taxation policy  Technology issues  Inefficient Material Handling Equipments  Technology Trends Technology Trends Trends T d Market Trends  Identification technology  Service‐wise diversification  Material handling technology  Region‐wise diversification  Communication technology  Information technologygy Key Players Public Player A, Player B, Player C, Player D, Player ECompetition Player F, Player G, Player H, Player I, Player J, Player K, Player L, Player M, Player N,  y , y , y , y , y , y , y , y , y , Private Player M, Player O, Player P PROJECT LOGISTICS MARKET IN INDIA 2012.PPT 2
  3. 3. •Introduction•Market Overview•GST Implementation•Project Logistics Management Solution•Key Success Factors•Issues Hampering Project Logistics•Drivers & Challenges•Drivers & Challenges•Market Trends•Technology Trends ec o ogy e ds•Competition•Strategic Recommendations•Appendix PROJECT LOGISTICS MARKET IN INDIA 2012.PPT 3
  4. 4. Logistics primarily deals in transportation and storage operations and is significantly aided by value added service  LOGISTICS  SECTOR TRANSPORTATION STORAGE VALUE ADDED SERVICE Container Rail Transport Modern Warehousing Modern Warehousing Freight Forwarding Road Transport Logistics Park Express Logistics 3PL/ 4PL Inland Container Depot Inland Container Depot Coastal Shipping Container Freight Station Courier Service Cold Chain Project Logistics Port • The logistics sector comprises mainly of 3 major segments – Transportation, Storage and Value‐added service • The growing Indian economy has a positive impact on players operating in storage and value‐ added services  segments while in transportation segment container train and project logistics is projecting a promising future  f outlook PROJECT LOGISTICS MARKET IN INDIA 2012.PPT 4
  5. 5. Growing investments in key sectors of the economy is driving the project logistics market in India Market Overview Market Size and Growth (Value‐wise)  INR bn• The Indian logistics market forms approximately a% of  600 g g the global logistics market in value terms x6• The term project logistics refers to the handling of global  500 X% x5 shipments with special characteristics such as 400 x4 x3  Heavy transports 300 x2 x1  Over dimension cargo g 200  Cargo with time and or security constraints 100  Cargo to remote and locations which are difficult to access 0• Economic growth in India in addition to huge demand for  20‐‐ 20‐‐ 20‐‐e 20‐‐e 20‐‐e 20‐‐e infrastructure development is simultaneously leading to  infrastructure development is simultaneously leading to growing demand for project logistics activity   Cargo Transport Segmentation • The project logistics market is currently valued at INR x1  units and growing at a rate of approximately X% is  b% expected to reach INR x expected to reach INR x2 units Segmentation on basis  Segmentation on basis of quantum of • Cargo transportation business that is usually segmented  business done into A and B  composes of a% and b% respectively of total  quantum of business  a%• The Indian market is highly fragmented with large section The Indian market is highly fragmented with large section  of unorganized players playing a dominant role A B PROJECT LOGISTICS MARKET IN INDIA 2012.PPT 5
  6. 6. Project logistics service providers face certain criticalities in while operating their business Transport Cost  Key Issues Technology Adoption Technology Adoption Hired Equipments  Hired Equipments PROJECT LOGISTICS MARKET IN INDIA 2012.PPT 6
  7. 7. Drivers & Challenges‐ Summary Challenges Poor quality infrastructure Project delays slowing down project  Drivers logistics sector Difficulty in permits attainment and  Growth in energy sector unfriendly taxation policy Rise in number of infrastructure  Technology issues projects Inefficient Material Handling  Demand accruing from mining sector Equipments  Increase in logistics demand from  automotive sector automotive sector Rise in warehousing facilities PROJECT LOGISTICS MARKET IN INDIA 2012.PPT 7
  8. 8. Non‐Conventional Energy Sources (1/3)  WIND Cumulative Wind Power Capacity MW ‘000 Reference Moderate Advanced• India is ranked 5th worldwide in terms of wind power  30 installed capacity and 3rd in terms of annual capacity  20 additions  c3 10 c1 c2  As on Jan 2012, Indian wind energy sector has an installed  b1 b2 b3 a1 a2 a3 capacity of 16,179 MW 0• A number of companies are entering into production of  2009 2010 2015e wind turbines due to India’s expansive opportunity in  Reference A conservative estimate taking into account existing policies but includes  assumptions like continuing electricity and gas market reform, liberalization of  cross border energy trade and policies aimed at pollution reduction India’s wind energy sector Takes into account all measures to support renewable energy and successful  Moderate • Foreign wind turbine manufacturing companies like Vestas, GE  implementation of targets as well as modest implementation of new policies Most ambitious with assumption of clear and unambiguous commitment to  Wind, Enercon and Gamesa have established their units in India Advanced renewable energy along with political support for implementation of projects• Wind turbine is manufactured in parts each of the parts Wind turbine is manufactured in parts, each of the parts  Planned Projects are considered as an ODC for logistic purpose  The manufactured parts treated as ODC has to be transported  Plant Owner State Plant Capacity (MW) to the required installation site which is generally in remote  Suzlon Energy Ltd. Andhra Pradesh 3000 p place  Gujarat Flurochemicals  Rajasthan, Gujarat,  1000 Ltd. Ltd Karnataka K t k – Generator, rotor and blades are some of the component termed as  ODC   Welspun Energy Ltd. Andhra Pradesh 500  The wind power generation projects would require smooth  Tiana Power Projects  Pvt. Ltd. Maharashtra 300 transportation of equipments thereby generating demand for  p j project logistics sector g Greenko Wind Project  Karnataka 300 Pvt. Ltd. Pvt Ltd PROJECT LOGISTICS MARKET IN INDIA 2012.PPT 8
  9. 9. Automobile industry’s dependence on transport of bulk auto components enhances demand for project logistics  Automotive Automobile Sector Growth • Indian automobile sector is growing at a healthy rate over  the years the years INR tn  The sector is expected to grow at m% CAGR between 20‐‐ to  8 m% b 20‐‐ • Individual automobile parts need to be transported  6 from various areas through logistics networks to  4 a assembling centre 2• Project logistics plays an integral role where automobile  parts in huge numbers are to be shipped  0 20‐‐ 20‐‐e  Meeting automobile business demands with efficiency and  timely transport of accessories and spare parts makes logistics  timely transport of accessories and spare parts makes logistics business crucial to the industry Operating Cost  Revenue Earning • The automobile sector incurs between m% ‐ n% of its  operating cost on logistics service a% c%  Logistics outsourcing is estimated to save freight cost of  automobile companies by approximately s%‐t%  Logistics being a non‐core function for the sector makes it  advantageous for the automobile manufacturers to depend on  logistics service providers who help in timely replenishment of  depleting inventories smoothly A B C D PROJECT LOGISTICS MARKET IN INDIA 2012.PPT 9
  10. 10. IT adoption in logistics sector particularly project logistics will help scale up efficiency in business operations • IT implementation comprises  mainly enterprise application  packages • ERP is one of the most popular IT ERP is one of the most popular IT  tool being used across logistics  mation ology Techno Inform • Direct data entry into  • Communication plays a key  computer role in logistics business • Technologies like bar  • Ensures speed and  coding, RFID, data  Identification Communication Competitive accuracy in customer  communication, magnetic  Technology Technology Advantage g service strip and voice recognition  strip and voice recognition • Helps in bringing in  are used competitiveness among  • Used for tracking rail cars  Handling and carton movement  Material 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  PROJECT LOGISTICS MARKET IN INDIA 2012.PPT 10
  11. 11. Major Public Companies – Summary Net Profit/Loss 8 Size of the Bubble represents Market  7 Capitalization in INR bn 6 5 4 3 2 1 0 ‐1 ‐2 ‐3 ‐4 ‐5 ‐200 ‐180 ‐160 ‐140 ‐120 ‐100 ‐80 ‐60 ‐40 ‐20 0 20 40 60 80 100 120 140 Total Income A B C D E PROJECT LOGISTICS MARKET IN INDIA 2012.PPT 11
  12. 12. Public: Domestic Company – Player A (1/3)Company Information Offices and Centres – India  Player ACorporate Address 5th Road, 6th Street,  City A – 700 xxx yTel No. 91 22 6679 xxxxFax No. 91 22 6679 xxxxWebsite www.playera.comYear of Incorporation 19‐‐Ticker Symbol 53xxxx (BSE)Stock Exchange Bombay Stock Exchange City X Head OfficeProducts and ServicesCategory Products/Services Key People CFS / ICD, Project & Engineering  Solutions, NVOCC, Ship owning, 3PL &  Solutions NVOCC Ship owning 3PL & Name DesignationLogistics solutions  warehousing, import handling, export  Person A MD handling, LCL shipment and  transportation Person B CFO Person C CEO PROJECT LOGISTICS MARKET IN INDIA 2012.PPT 12
  13. 13. Private: Foreign Company – Player A (2/3) Financial Snapshot i i lS h Key Ratios K i y‐o‐y change  Total Income Net Profit/Loss Particulars  (2011‐10) 2011 2010 2009 2008 INR units INR units Profitability Ratios Operating Margin250 ‐20 20 Net Margin200 a Profit Before Tax Margin ‐40 Return on Equity150 d b c R4 Return on Capital Employed100 R3 Return on Working Capital ‐60 50 R2 Return on Assets R1 Return on Fixed Assets 0 ‐80 Cost Ratios 20‐‐ 20‐‐ 20‐‐ 20‐‐ Operating costs (% of Sales) Administration costs (% of  Sales)Financial Summary  Interest costs (% of Sales) Interest costs (% of Sales)• The company incurred a net loss of INR d units in FY 20‐‐, as  Liquidity Ratios Current Ratio compared to net loss of INR c units in FY 20‐‐ Cash Ratio• The company reported total income of INR R4 units in FY 20‐‐,  Leverage Ratios registering an increase of m% over FY 20‐‐ Debt to Equity Ratio Debt to Capital Ratio b i l i• The company earned an operating margin of f% in FY 20‐‐, an  Interest Coverage Ratio increase of g percentage points over FY 20‐‐ Efficiency Ratios• The company reported debt to equity ratio of d in FY 20‐‐, a  Fixed Asset Turnover decrease of h% over FY 20‐‐ Asset Turnover Current Asset Turnover Working Capital Turnover Capital Employed Turnover Improved Decline PROJECT LOGISTICS MARKET IN INDIA 2012.PPT 13
  14. 14. Private: Foreign Company – Player A (3/3) Key Business Segments Key Geographic Segments A B C A B C D E F G % %100% 100%50% 50% 0% 0% 20‐‐ 20‐‐ 20‐‐ 20‐‐ 20‐‐ 20‐‐Business HighlightsDescription  NewsOverviewAcquisitions PROJECT LOGISTICS MARKET IN INDIA 2012.PPT 14
  15. 15. AppendixRatio Calculations Ratio Calculations (Operating  Current Assets / Current Operating Margin Current Ratio Income/Revenues)*100 Liabilities Net Margin (Net Profit / Revenues) *100 {(Cash & Bank Balance +  Cash Ratio Marketable Securities) / Current  (Income Before Tax / Revenues  Liabilities)} Profit Before Tax Margin *100  Total Liabilities / Shareholders  q y Debt to Equity  (Net Income / Shareholders  (N I / Sh h ld Equity  E itReturn on Equity (ROE)  Equity)*100  {Total Debt / (Shareholders  Debt to Capital Ratio EBIT / (Total Assets – Current  Equity + Total Debt)} Return on Capital (ROCE)  Liabilities)*100  Interest Coverage Ratio EBIT / Interest Expense (Net Income / Working Capital)  (N I / W ki C i l)Return on Working Capital *100 Fixed Asset Turnover Sales / Fixed Assets Return on Assets (Net Income / Total Assets)*100  Asset Turnover Sales / Total Assets Return on Fixed Assets (Net Income / Fixed Assets) *100  (Operating Expenses / Sales)  Current Asset Turnover  Sales / Current Assets Operating Costs (% of Sales) *100 Administration Costs (% of  (Administrative Expenses / Sales)  Working Capital Turnover Sales / Working Capital Sales) *100 Interest Costs (% of Sales) (Interest Expenses / Sales) *100  Capital Employed Turnover  Sales / Shareholders Equity  / PROJECT LOGISTICS MARKET IN INDIA 2012.PPT 15
  16. 16. Thank you for the attentionThe Project Logistics Market – India report is part of Netscribes’ Transportation & Logistics Series.For more detailed information or customized research requirements please contact:Phone: +91 33 4064 6214 +91 33 4064 6214E‐Mail: sales@netscribes.comFollow us on:About NetscribesNetscribes is a knowledge‐consulting and solutions firm with clientele across the globe. The company’s expertise spans areas of investment &  g g f g p y p p fbusiness research, business & corporate intelligence, content‐management services, and knowledge‐software services. At its core lies a true value proposition that draws upon a vast knowledge base. Netscribes is a one‐stop shop designed to fulfil clients’ profitability and growth objectives.Disclaimer: This report is published for general information only. Although high standards have been used in the preparation,  Netscribes isDisclaimer: This report is published for general information only Although high standards have been used in the preparation “Netscribes” is not responsible for any loss or damage arising from use of this document. This document is the sole property of Netscribes and prior permission is required for guidelines on reproduction. PROJECT LOGISTICS MARKET IN INDIA 2012.PPT 16