Market Research Report : Container rail market in India 2012

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Rail Transport Market – India
June 2012

Executive Summary

 Indian Railways has generated INR xx bn freight earning in the first 9 months (Apr ‐ Dec) of 2011‐12 with xx%
CAGR over the period 2009‐10 and 2011‐12
Market  Indian Railways has loaded yy MT freight loading in the first 9 months (Apr ‐ Dec) of 2011‐12 with yy% CAGR
over the period 2009‐10 and 2011‐12

Drivers Challenges
– Shift from Road to Rail by Private Players – Service Quality
Drivers &
Challenges
SAMPLE
– Increasing Export‐Import
– Dynamic Tariff Policy
– Opportunity in Emerging Sector
– Increase in Rail Freight Rates
– Problems with Connectivity

 Marketing for Freight
 Freight Business
Operational  Infrastructure
Strategy  Information Technology
 Rolling stock (Electrical)
 Rolling Stock (Mechanical)

Major Players

Container Corporation of India Ltd. Gateway Rail Freight Hind Terminals Ltd.
Competition (Concor) Ltd (GRFL) (MSC Group)
India Infrastructure & Logistics Pvt Container Rail Road Services Pvt. Arshiya Rail
Ltd (APL) Ltd (DPW) Infrastructure Ltd.

RAIL TRANSPORT MARKET IN INDIA 2012.PPT 2

•Introduction
•Market Overview
•Revenue Generation
Zone Wise Income
Commodity Wise Income
•Freight Services Initiatives
•Freight Marketing Schemes
•Vision 2020
Operational Strategy
•Drivers and Challenges
•Competition
•Future Requirements & Investments
•Strategic Recommendation
•Appendix

Indian Railways ‐ Basic Statistics
SAMPLE
• Indian Railways (IR) is the world’s 4th largest rail network and the 2nd largest in Asia
• IR also happens to be the world’s fourth largest freight carrier
• Rail freight in India, particularly container rail operations which was primarily controlled by government has been opened to
private operators since 2006 in order to bring competition in the rail freight market
• Entry of private and public sector operators is permitted by Ministry of Railways to get licenses for running container trains on
the IR network

Basic Statistics of Indian Railways (as of Feb, 2012)
No. of railway stations 7,083
No. of railway bridges 1, 31,205
No. of locomotives 9000
No. of freight cars 2,19,931
No. of route kilometers 63,974
No. of trains each day 19,000
No. of freight trains per day 7,000
Freight traffic per day 2.65 MT
No. of employees 1.36 mn
Annual revenue base INR 1, 060 bn

Freight Rates
• From 1st Apr 2010, ‘Inflation Concession’ of INR 100 per wagon is approved on booking of food grains for domestic use and
Kerosene Oil
• From 27th Dec 2010, the taper of the Base Class‐100 was rationalized resulting in increase in freight rates ranging from 0.15% to
3.95% from 101 to 500 kms and 4% beyond 500 kms which did not increase in freight rates of food grains and chemical
manures
• Revision of classification of sugar and de‐oiled cakes from Class‐110 to Class‐120


SAMPLE
Rail Transport (Freight) Market – Value Chain

Rail Infrastructure Rail Freight
Manager Operator

Distributor

Other Modes of
Freight Transport
Logistic Company
Freight Forwarder
(eg. Road)

Freight Mode Transfer

Destination Terminal

Buyers


Freight earning by Indian Railways grew at about 8% CAGR
over the period 2009‐10 and 2011‐12
Rail Transport Market – Overview
• Earnings from freight traffic (including ‘Other Goods Earnings’ such as wharfage, demurrage, etc.) by Indian Railways
increased to INR xx bn in the first 9 months (Apr ‐ Dec) of 2011‐12 up by INR yy bn from the earnings in the

SAMPLE
corresponding period of the previous year
• Nine major commodity groups, namely coal, iron and steel, iron ore ( both for export and domestic steel plants), other
raw materials for steel plants, cement, food grain, fertilizer, petroleum products and container traffic dominates the
freight basket of Indian Railways
 Bulk freight like coal, pig iron and finished steel, iron ore, cement, foodgrains, fertilizers and POL products contributed 86% of the total
goods earnings in the first 9 months (April December) of 2011‐12 , while commodities other than the above accounted for 14%

Market Size ‐ Freight Earning (By Value) Market Split ‐ Freight Earning
a f
INR bn b g
Xx% 1.7%
a c h
5.7%
b d i
41.0% 11.8%
c 9.6% e j
d 5.3% 6.4%
e 6.2%
5.1%
0 7.3%
2009‐10 2010‐11 2011‐12

Note: Years correspond to Apr‐Dec period Data taken for ‘raw materials for steel plants’ does not include iron ore


Efficiency Indices ‐ Freight Operation
Efficiency Indices of Freight Operation
SAMPLE
Description 2007‐08 2008‐09 2009‐10 2010‐11

BG (Broad Gauge)
Net tonne kilometres per wagon per day
MG (Meter Gauge)

BG
Wagon kilometres per wagon per day
MG

Diesel ‐ BG

Net tonne kilometres per engine hour Diesel ‐ MG

Electric ‐ BG

Diesel ‐ BG

Net tonne kilometres per engine day on
line Diesel ‐ MG

Electric ‐ BG

+ in terms of 8‐wheelers
* revised


SAMPLE
Indian Zonal Railways ‐ Snapshot

Central Railway
East Central Railway
East Coast Railway
Eastern Railway
North Central Railway
North Eastern Railway
North Western Railway
Northeast Frontier Railway
Northern Railway
South Central Railway
South East Central Railway
South Eastern Railway
South Western Railway
Southern Railway
West Central Railway
Western Railway


Zonal Railways in India (x/x)

Central Railway – Overview
• Central Railway covers a large part of the state of Maharashtra and parts of North‐Eastern Karnataka and Southern
Madhya Pradesh
• It covers 3905.47 km of route network with 5975.33 km of track linking 477 stations

SAMPLE
• It is divided into five divisions: Mumbai, Pune, Bhusawal, Nagpur and Solapur
• Freight business ‐ major commodities carried are coal, imported coal, cement, petroleum products, indigenous
fertilizers, sugar, containers, and onion etc.

Freight Revenue Earning Profile (By Value) Freight Loading Profile (By Volume)
INR bn MT
a a

b b
8.84
c 9.76 9.53
0.00 0.17 c 20.03 18.76 17.34
0.37 0.34 3.38
d 2.44 2.45 0.60 1.50 0.00
0.53 1.47 0.59 1.52 0.30 0.02 0.01 0.18
e 2.00 2.20 2.52 d 4.22 0.3 0.0 4.18 5.37
1.80 0.63 1.93 0.80 2.69
1.91 0.84
6.36 2.24 2.48
6.65 6.36 e
f 8.74 8.09 8.05
2.79 2.89 3.90 2.97 3.00 3.69
0 0
2009‐10 2010‐11 2011‐12 2009‐10 2010‐11 2011‐12

a c e g i
b d f h j
Note: Years correspond to Apr‐Dec period


xxx

Coal – Overview Coal Usage – Segments (2011‐12)
• In 2011‐12 (Apr ‐ Dec), IR carried xx MT of coal, 65% of
the quantity being for thermal power stations, 11% for 10.5%
steel plants and the rest for other industries and public 23.7% a c
0.4%
use b d

SAMPLE
• Maximum coal is loaded by South East Central Railways
followed by east Central railways in 2011‐12 as sources
of coal would be ever more restricted to South‐eastern
Coalfield and Mahanadi Coalfields
65.4%

Coal Loading (By Volume) ‐ (2011‐12)
MT
a
b
c
d
e
f
g
0
Central East East Coast Eastern Northeast Northern South South East South South Southern Western Total
Central Frontier Central Central Eastern Western

Note: Years correspond to Apr‐Dec period


SAMPLE
Initiatives for Freight Services (x/x)

Segregation of freight and
passenger corridors

Meeting customers needs in
Construction of
service delivery, logistics
dedicated freight corridors
services, transit time & tariff Initiatives
for
Freight
Services

Cost‐efficiencies in bulk transport Improving the transit speed


Schemes for Freight Marketing (x/x)
Special Freight Train Wagon Investment Wagon Leasing Terminal Development
Operator Scheme (SFTO) Scheme Scheme (WLS) Scheme (TDS)

• xxx • xxx • xxx • xxx

SAMPLE


Drivers & Challenges – Summary

Challenges

Drivers Service Quality
Shift from Road to Rail by Private
Players Increase in Rail Freight Rates

Increasing Export‐Import Problems with Connectivity

Dynamic Tariff Policy

Opportunity in Emerging Sector


Scope for capturing higher market share as rail freight gains
popularity…
Shift from Road to Rail by Private Players (1/2) Impact
• Entry of private players in container rail business has intensified the competition and improved
the efficiency in container rail services
• Privatization of container rail operations has attracted 16 players

SAMPLE
 With 500 rakes expected to be operational by 2013 and full utilization level container rail operators expects
to achieve 3% of the overall freight market by trying to shift volumes from road to rail
 Container rail industry has a capacity of about 300 rakes, of which Concor accounts for 220 rakes while the
rest are with private players
• Private players with huge investments in the container rail business are planning for further
investments
 Operators need to invest heavily in hard infrastructure such as rakes, terminals (ICDs/ rail sidings),
containers, container handling equipment (reach stackers, etc) as also truck‐related and software
investments in order to offer integrated, value‐added logistics solutions with last mile connectivity to shift
volumes from road to rail
 To earn economies of scale and profitability operators need appropriate asset turnaround time and
utilization levels
Share of Freight handled ( 2011‐12)
Air Freight
Sea Freight

15.6% Rail Freight
0.1% 28.1% Only about 28% of the
Huge scope in rail
freight is transported by
freight due to its
Indian Railways, while
cheaper mode of
the remaining gets
transportation and
transported via road, air
lower penetration level 56.2%
and sea
Road Freight


Increase in rail freight charges likely to put negative impact
on the manufacturing sector in India
Increase in Rail Freight Rates Impact
• Increase in service tax rate to 12.3% from 10.3% in the 2012‐13 budget brings a huge burden on
rail freight with an expected rise of about 3.6% in rail freight rates from July, 2012
 Service tax will be imposed on 30% of the value of input goods and services
 Commodities such as coal, cement, gypsum, steel and iron comprising 70% of the freight traffic will become
expensive following the additional levy

SAMPLE
• Increase in rail freight is adversely affecting the states like Punjab which is away from the coasts
 Punjab industry which is far from the coasts and also from the raw material is facing fierce competition
from the other states which are near the coasts
• Products made in Punjab will become highly expensive for the other states as it is a net exporter
selling almost 80% of its production to other states
 Steel prices will rise by 2%
• Exporters are also adversely affected with the increase in the freight rates in all commodities
• Increase in rail freight rates by Railway Ministry –

Steel 15%
‐ 37% Domestic Iron Ore 50%

Coal & Cement 18%
‐ 24%
Food grains &
Fertilizer
20%
‐ 35%

Increase in Increase in Increase in the power Losing competitiveness
coal freight manufacturing cost prices in Punjab in manufacturing in India

Adverse impact on future
thermal power plants in Punjab


Public: Domestic Company – Player A (1/3)
Company Information
SAMPLE Offices and Centres – India

Corporate Address

Tel No.
Fax No. New Delhi
Website
Year of Incorporation
Ticker Symbol
Stock Exchange
Head Office

Products and Services
Category Products/Services
Key People
Name Designation


Financial Snapshot
SAMPLE Key Ratios
y‐o‐y change
Total Income Particulars 2011 2010 2009 2008
INR mn INR mn (2011‐10)
Net Profit/Loss Profitability Ratios
60000 40862.4 10000
35213.1 36490.6 39053.8 Operating Margin 0.34 21.77% 21.43% 22.56% 22.04%

40000 Net Margin 1.54 21.45% 19.91% 21.35% 20.85%
5000 Profit Before Tax Margin 0.36 25.91% 25.56% 27.80% 26.42%
20000 Return on Equity ‐0.35 17.74% 18.10% 20.88% 23.19%
Return on Capital Employed ‐1.29 17.10% 18.39% 20.71% 22.90%
0 0 Return on Working Capital ‐2.38 38.22% 40.59% 50.73% 54.32%
2008 2009 2010 2011 Return on Assets 0.20 15.19% 14.99% 16.94% 18.64%

Financial Summary Return on Fixed Assets 0.37 32.82% 32.46% 35.08% 39.34%

Cost Ratios
• The company earned a net profit of INR 8,800 mn in FY 2011, as Operating costs (% of Sales) ‐0.42 77.14% 77.57% 76.15% 76.93%
compared to net profit of INR 7,800 mn in FY 2010 Administration costs (% of
‐0.68 2.32% 3.00% 2.99% 2.09%
• The company reported total income of INR 40,900 mn in FY 2011, Sales)
Interest costs (% of Sales) 0.00 0.00% 0.00% 0.00% 0.00%
registering an increase of 4.6% over FY 2010
Liquidity Ratios
• The company earned an operating margin of 21.77% in FY 2011, an Current Ratio 26.33% 5.06 4.00 3.46 3.46
increase of 0.34 percentage points over FY 2010 Cash Ratio 28.71% 4.41 3.43 3.10 2.99
• The company reported debt to equity ratio of 0.17 in FY 2011, a Leverage Ratios
decrease of 18.96% over FY 2010 Debt to Equity Ratio ‐18.96% 0.17 0.21 0.23 0.24
Debt to Capital Ratio ‐48.04% 0.01 0.02 0.04 0.05
Key Financial Performance Indicators Interest Coverage Ratio N.A. N.A. N.A. N.A. N.A.

Indicators Value (dd/mm/yyyy) Efficiency Ratios
Market Capitalization (INR mn) 113,3 00 Fixed Asset Turnover ‐6.37% 1.46 1.56 1.55 1.80
Asset Turnover ‐6.17% 0.67 0.72 0.75 0.85
Total Enterprise Value (INR mn) 91,000
Current Asset Turnover ‐6.79% 1.36 1.46 1.60 1.77
EPS (INR) 69.13 Working Capital Turnover ‐12.84% 1.70 1.95 2.25 2.49
PE Ratio (Absolute)‐8th June, Capital Employed Turnover ‐9.22% 0.79 0.87 0.93 1.06
12.62
2012
Improved Decline


Key Business Segments
SAMPLE
Key Geographic Segments
a b c India
INR mn
33,645 34,524 37,057 38,281
100% 1% 1% 0% 0% 100%
21% 20% 22% 22% India is the only geographic
segment in which the
50% 50% 100% company has been operating
79% 79% 78% 78%
for the last five years
0% 0%
2008 2009 2010 2011 2011

Business Highlights

Description News
Overview

Cost Rise

Partnerships


Major Private Companies ‐ Summary
SAMPLE Size of the Bubble represents Total Assets
Net Profit/Loss
in INR mn
600

400 4,693

200
1,875 5,370
0
1,666
2,369 2,581
‐200

‐400 3,344
7,015 7,197
‐600
3,574
‐800
2,778
‐1,000

‐1,200 Total income
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500

a c e g h i b d f j l
k

Note: All figures are in INR mn and are based on the latest financials available


Private: Domestic Company – Player B (1/3)
Company Information
SAMPLE Offices and Centres – India

Corporate Address

Gurgaon
Tel No.
Fax No.
Website
Year of Incorporation
Head Office

Products and Services
Category Products/Services
Key People
Name Designation


Financial Snapshot
SAMPLE Key Ratios
y‐o‐y change
Total Income Net Profit/Loss Particulars
(2011‐10)
2011 2010 2009 2008

INR mn INR mn Profitability Ratios
Operating Margin 11.33 158.76% 147.43% 85.78% 85.47%
1500 1376.6 0
Net Margin 2.84 ‐39.51% ‐42.35% ‐34.24% ‐12.04%
1169.3
Profit Before Tax Margin 14.83 ‐3.54% ‐18.36% ‐33.73% ‐13.47%
1000 ‐200 Return on Equity ‐1.56 ‐17.44% ‐15.88% ‐13.03% ‐2.17%

559.6 Return on Capital Employed 6.47 32.09% 25.62% 10.24% 8.61%
Return on Working Capital ‐9.23 ‐47.77% ‐38.55% ‐14.12% ‐32.91%
500 ‐400
222.9 Return on Assets ‐0.61 ‐7.75% ‐7.14% ‐3.95% ‐1.20%
Return on Fixed Assets ‐0.73 ‐11.84% ‐11.11% ‐19.23% ‐544.86%
0 ‐600 Cost Ratios
2008 2009 2010 2011 Operating costs (% of Sales) ‐3.12 ‐84.18% ‐81.06% 13.85% 14.36%
Administration costs (% of
‐0.29 4.97% 5.27% 5.22% 1.90%
Sales)
Financial Summary Interest costs (% of Sales) ‐24.46 8.02% 32.48% 0.00% 0.00%

• The company incurred a net loss of INR 543.89 mn in FY 2011, Liquidity Ratios
Current Ratio ‐10.05% 6.57 7.31 9.15 3.87
as compared to net loss of INR 495.22 mn in FY 2010
Cash Ratio 3.39% 6.02 5.82 8.58 2.69
• The company reported total income of INR 1,376.65 mn in FY Leverage Ratios
2011, registering an increase/decrease of 17.7% over FY 2010 Debt to Equity Ratio 4.88% 1.25 1.19 2.31 0.81
Debt to Capital Ratio 2.17% 0.56 0.54 0.70 0.45
• The company earned an operating margin of 158.76% in FY Interest Coverage Ratio 311.83% 22.96 5.57 N.A. N.A.
2011, an increase of 11.33 percentage points over FY 2010 Efficiency Ratios
• The company reported debt to equity ratio of 1.25 in FY 2011, Fixed Asset Turnover 20.93% 0.26 0.21 0.56 45.17
Asset Turnover 23.15% 0.17 0.14 0.11 0.10
an increase of 4.88% over FY 2010
Current Asset Turnover 38.14% 0.88 0.64 0.37 2.02
Working Capital Turnover 40.63% 1.04 0.74 0.41 2.73
Capital Employed Turnover 24.62% 0.38 0.31 0.38 0.18

Improved Decline


SAMPLE
Business Highlights

Description News

Overview

Investment Plans

Projects


SAMPLE
Modernization Initiatives & Investment Requirements
• Based on the five‐pronged strategy ‘15 focus areas’ were identified in order to drive modernization
1.0 Track Stations &
Core Assets Signaling Rolling Stock
And Bridges Terminals
Dedicated Freight High Speed
Revenue Models PPPs Land
Corridors Trains
Projects Review of existing and proposed Projects
Enablers ICT Indigenous Development Safety
15.0
Resources Funding Human Resource
Organization

Total Investment Requirements for Modernization

INR bn
6,000 5,603
330 6% a d g
5,000 250
725 17.3% b e h
4,000 12.9% c f i
1,100
3,000 13 170 5

2,000 2,040
36.4% 0.1% 19.6%
0.2%
1,000 3.0%
970
0


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Market Research Report : Container rail market in India 2012

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Market Research Report : Container rail market in India 2012