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T IS BOOM TIME NOW for India’s supply chainand logistics industry. After having negotiatedlast year’s economic downturn rather adroitly, itis now emerging with renewed vitality, expand-ing its services and reach and finding capital tofinance them.

The industry has emerged from its toughesttwo years, evolved and learned, says Gautami Sek-saria, founder-partner of the Supply Chain Lead-ership Council. “The downturn drove severalsmall and mid-sized logistics service providers outof business,” she notes. “This, in turn, acceleratedconsolidation as sub-scale firms realised that tosell off in time was better value than competingagainst larger firms as well as cyclical troughs.”

The downturn had a cascading effect of declin-ing volumes on all industry verticals driving the economy. “The financial sector was ravaged,automotive sales and demand for consumerdurables and electronics plunged, and the out-look for the airfreight industry was probably bestdescribed as extremely challenging,” mentionsYogesh Dhingra, finance director and COO ofBlue Dart Express Ltd, the Mumbai-based express

air and integrated transportation, distributionand logistics company. “Declining sales in mostindustry verticals led to a decline in usage ofexpress services, though the pharma sector, andto some extent food products, managed toweather the storm.”

V.G. Ramakrishnan reckons the domestic logis-tics business to have earned revenues of $75.19 bil-lion in 2009, representing 6.2 per cent of thecountry’s GDP. The senior director of Frost & Sulli-van for transportation & logistics practice (SouthAsia, Middle East & North Africa) now projects thisto top $82.1 billion this year and $120.42 billionby 2014. That would translate into a CAGR of 9.9per cent in those five years, comparing favourablywith the $3.43 trillion global market growing at aless hurried 7.5 per cent per annum. Mountingdomestic consumption will be the key driver,mentions Ramakrishnan, especially organisedretailing and food processing, poised to grow at a10 per cent CAGR to $833 billion by 2013 and to$1.3 trillion by 2018.

Mindful of the bearing logistics has on theeconomy, the government is according it a vital

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fillip through massiveinvestments in infrastruc-ture development. The ini-tiatives include roads andexpressways, rail freight cor-ridors, Free Trade and Ware-housing Zones (FTWZs),and public private partner-ships (PPPs) in developingports and roads.

The 11th Five Year Plan(2007-12) envisages close to$500 billion being investedin the infrastructure space.Ramakrishnan calculatesIndia’s transportation mar-ket to be worth $46.5 billionin 2009, representing 62 percent of the country’s totallogistics spend and 3.8 percent of its GDP. However,he says that while the roadsegment held 59 per cent ofthe total transportationmarket in India in 2009, itsshare is likely to decline to57 per cent by 2014 withother segments gainingshare. Air, coastal andinland water segments areexpected to be the maxi-mum gainers owing to thecapacities being currentlydeveloped in these modes.

FTWZs and the impend-ing Goods and Services Tax (GST) are especially setto become the game changers for India’s logisticsand supply chain industry. With this in view,more and more logistics service providers are grad-uating into third party logistics (3PL), which is setto experience explosive organic growth as a result.Praveen Ojha, logistics analyst with independentmarket researcher, Datamonitor, predicts thatdomestic businesses across verticals are nowincreasingly seeking and using the services of 3PLproviders in order to reduce logistics costs and tofocus on core competencies. “In my opinion,

introduction of GST from next year will play avital role in the growth of warehousing in India. Inthe GST regime, we envisage a paradigm shift inbusiness models as well as supply chain models ofmany companies. GST would enable manufactur-ers to manage Distribution Centres (DCs) acrossIndia at very few strategic locations. At present, tosave on Central Sales Tax (CST), manufacturers arecompelled to maintain warehouses at multiplelocations to show the movement of goods fromone company warehouse to another,” says VineetKanaujia, GM – marketing, Safexpress.

Logistics players are looking forward to theintroduction of goods and services tax (GST) by2011 to restructure their industry. Heralded as thebiggest tax reform since Independence, GST isexpected to replace almost all indirect taxes, elim-inate exemptions, do away withthe current multiple layers oftaxation and follow the princi-ple of destination, instead of ori-gin. It will also rationalise andsimplify the consumption taxstructure at both the Central andstate levels.

“Development and opera-tionalisation of FTWZs andimplementation of GST repre-sent two of the most powerfulchanges that loom upon theIndian logistics and supplychain space,” avers Manish Sai-gal, executive director and headof transportation and logistics, KPMG. “It is inter-esting that there is at least some homogeneity inthese two, as both, from a logistics services stand-point, will act as catalysts of scale in a sectorwhich is notoriously fragmented into sub-scalelogistics and transportation infrastructure, caus-ing logistics services to be deficient in quality andhigh in cost.”

India’s growing domestic consumption andher ideal location on the global east-west tradecorridor makes development of FTWZs con-ducive, in turn, creating opportunities for costefficient and operationally effective supplychains, Saigal notes. GST, on the other hand, will

Dhingra:extremelychallengingscenario

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encourage the hub and spoke model for domesticdistribution, based on logistics through fewer,larger, more advanced warehouses in nodal loca-tions as opposed to a sprinkling of small, sub-scalewarehouses across the country based on stateboundaries, taxes and complexities.

Malcolm Monteiro, senior vice president andarea director, South Asia, DHL Express Asia Pacific,sees FTWZs and GST creating a favourable envi-ronment for the logistics business. “India serves asa major sourcing and supply hub and FTWZs are apositive step by the government in this direction,”

he says. His company is settingup a $10 million FTWZ in Sripe-rumbudur, Tamil Nadu.

GST will make the supplychain tax-neutral, with the finallevy on all products remainingthe same, irrespective of its siteof production, sourcing of rawmaterial, and the nature andcomplexity of the distributionchain. The tax is charged oneach transaction in the supplychain, with registered businessesreceiving a credit for GST paidon purchases.

Global 3PL providers aregrowing their networks in India, while leadingdomestic 3PL providers are offering total supplychain solutions. A 3PL provider offers outsourcedor ‘third party’ logistics services to companies forpart or all of their supply chain managementfunctions. It typically specialises in integratedoperation, warehousing and transportation ser-vices that can be scaled and customised to cus-tomers’ needs based on market conditions andthe demands and delivery service requirementsfor their products and materials.

As the industry becomes more organised, thevalue proposition of 3PL will increase. Revenuesof the 3PL segment are projected to grow at a 27per cent CAGR to around Rs16,200 crore in 2013-14. Third party logistics players are realising thepotential in contract logistics as companies lookfor more than just transportation of their prod-ucts and raw materials. Trucking and courier com-panies are now leveraging their networks toprovide express distribution and warehousing.Similarly, freight forwarders are moving towardsowning assets in the form of Container FreightStations (CFSes), Inland Container Depots (ICDs)and container trains. “Strong FDIs in automotive,capital goods, electronics, retail and telecommu-nications will increase market opportunities for3PL providers in India,” says Ojha. Domesticmanufacturers, wholesalers and retailers areincreasingly looking to 3PL providers as deliveriesand transactions can be decisive for success in a

market like India. After all, they need to get theirproducts to market at the right time, at the rightplace and at a right price.

Blue Dart is one such entity that deploys its6,940-strong workforce and a fleet strength ofthree Boeing 737 and four Boeing 757 airfreighters and 5,328 vehicles to deliver to over25,460 locations in India. “It has critical domainexpertise and enjoys a 43 per cent market share inthe domestic air express industry,” says managingdirector Anil Khanna. His company seeks to fur-ther dominate the market and grow organically inboth air and ground space by expanding its net-work and reach, continuously upgrading technol-ogy, building superior infrastructure andoptimising its resources to provide customers theedge in the market place. Through its alliancewith DHL, the global market leader in interna-tional air express and logistics, Blue Dart alreadyreaches 220 countries worldwide.

His company is part of the Deutsche Post DHLGroup, 81.03 per cent of its equity having beenacquired in 2005 by DHL Express (Singapore) PteLtd, a company under the Deutsche Post WorldNet umbrella. “DHL’s market leadership in inter-national air express complements Blue Dart’sestablished domestic strengths, unique infra-structure, network and reach,” notes Khanna.Blue Dart nevertheless continues to operate as an independent brand and provides a completespectrum of domestic and international expressservices through synergies with DHL.

SET TO CHANGELars Sorensen, managing director of Damco forIndia and South Asia, finds the incidence of out-sourcing of supply chain management in India to3PLs to be low at present. But he feels this willchange with changing market dynamics. Besides,industries like automobile and retail, whichrequire cutting edge supply chain practices, arewitnessing enormous growth. “India is poised tobe the largest exporter of small cars in the worldand is also ranked one of the topmost emergingretail markets in the world,” he explains. “Theseindustries will definitely push for increase indemand for logistics services.” Developments ininfrastructure and multi-modal logistics are alsopushing up demand for project cargo logistics.New modes like short-sea and container rail areemerging as viable options to traditional modeslike road. The greater infrastructure investmentbeing made by the government will only helpimprove logistics capabilities and increase themarket potential in India.

India’s logistics business embarks on a historicshift with the launch of the first FTWZ by Mumbai-based logistics major Arshiya International Ltd atPanvel near Mumbai by July end. FTWZs will not

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Khanna: weenjoy a 43 percent marketshare

only allow hubbing in strategic locations acrossIndia, but will also evoke the requisite frameworkto remove inefficiencies. This development willfinally enable India to compete with the world’slargest trading hubs like Singapore and Dubai.These zones can also allow the country to leverageits strategic positioning between Asia Pacific andthe Middle East to become the largest trading, stor-age and distribution hub of Asia and be a soughtafter transshipment hub for the region.

FTWZs will also provide India with the opportu-nity to prove to the world its skill and cost arbitragethrough the zones, providing new jobs and eco-nomic stimulus, alongwith much needed logisticsefficiencies. They will additionally be salutary for local infrastructure and facilities and overall,

raise the standard of living of thepeople in their vicinity.

Ramakrishnan estimates ademand for 50 FTWZs and ICDsin the next decade, at a total costof Rs7,500 crore. Ramesh Nair,managing director (warehous-ing and logistics solutions),Jones Lang LaSalle Meghraj, saysthe policy allowing the estab-lishment of FTWZs promotesthe cause of integrated logisticsfacilities. As a special category ofspecial economic zones (SEZ)with a focus on trading andwarehousing, FTWZs are admis-

sible to all the tax benefits extended to SEZs andprovide duty-free warehousing to exporters.

High technology warehousing provides greatstrategic advantage and is becoming core to com-panies’ growth strategies. Duty will be paid only onthe volume of goods cleared from the SEZ’s ware-house for export and not on the entire volume inthe warehouse. The scheme envisages the creationof world class infrastructure for warehousing oftransportation and handling facilities, commercialoffice space, water, power, communications andconnectivity, with a one-stop clearance of importand export formality to allow the integratedFTWZs to become ‘international trading hubs’.

Logistics players are capitalising on these

unfolding opportunities as they unshackle them-selves from recession. Their business has come along way from the times when a trucking com-pany could get away with claiming to be a logis-tics service provider. This service now defines itsvalue addition from end-to-end solutions ratherthan simple physical deliveries. An integratedlogistics business portfolio today transcendsfreighting to span activities that have a local,national, regional and global reach through askilled and responsive staff, an expansive trans-port fleet, cargo tracking facility, supply chainmechanisms and information technology.

S.V. Krishnan, CFO of Chennai-based Reding-ton, says his company is earmarking most of itscapital expenditure for the next two to three yearstowards setting up warehouses across variouslocations. “In 2010-11, we intend investing about$8.5 million in an Automated Distribution Centre(ADC) in Dubai – which will become operationalby August 2010 – and about Rs25 crore in a DC inKolkata, expected to be operational by 2011-12.”

DISTRIBUTION CENTRESAn ADC has been operational in Chennai sinceJune last year and others are coming up in Kolkataand Delhi, as well as Mumbai in due course. Thesecentres are essentially ‘mother distribution cen-tres’, in addition to catering to local requirements.There are also the centres for 3PL warehousing ser-vices, Redington having added 3PL and RemoteInfrastructure Management (RIM) services for itsclients over the past two years. “Our growth strat-egy is to continually improve supply chain effi-ciency by increasing throughput and reducinginventories,” says Krishnan. “The roll out of GSTwill further strengthen our network by helping usjudiciously consolidate our warehouses at strategiclocations.” His company has increased its numberof warehouses from 56 in 2007-08 to 59 in 2008-09and to 62 in 2009-10. He says Redington also pro-poses to nurture its non-banking finance company(NBFC), Easyaccess Financial Services, which isdoing well in trade finance for channel partners.

Akash Bansal, head of logistics, Om Group,says his enterprise is backed by 13,000 sq ft ofwarehousing, a fleet of 3,000 trucks and 400 com-

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puterised branches, covering a thousand loca-tions across the country. Om Group’s forte hasbeen in ‘car transportation’ and door-to-doorcargo services across the Indian subcontinent.

Last April, the company launched warehousesin Ahmedabad, Jamalpur (Haryana) and Chennai.Bansal mentions that though India’s warehous-ing sector has been growing at a rapid pace, thereis still a shortage of warehousing and storagespace. “We look forward to developing warehous-ing across multiple locations for leading globaland domestic companies looking for high qualityinfrastructure,” he says. “All our warehouses fea-ture modern palletised storage systems withheavy and medium racking systems.”

Ajay Singhal, CMD, Om Group, made a forayinto logistics in the early 1980s.The Delhi-based enterprise drewon its association with MarutiUdyog and Bajaj Auto and overthe years established Om AutoCarriers and Om Air Freight. OmLogistics Ltd was promoted inorder to consolidate the Group'svarious logistics and other ser-vices related to supply chainmanagement. Singhal says thatit was with deft customisedlogistics tools that his enterprisegrew to record a turnover ofRs1,000 crore last year. “Withour diversified interests in all

elements of supply chain management, we havebeen a single window solution provider for thetotal supply chain in India,” he says.

TNT India Pvt Ltd is also expanding its ware-housing capacities and strengthening its presencein Tier II and III cities. “Many Indian businessesare not only growing their footprint domestically,but also internationally, making it an excitingtime for TNT in the country,” notes Onno Boots,TNT’s regional managing director for SoutheastAsia and India. “We are thus intensively buildingour connectivity within India to provide cus-tomers with a strong, integrated air and road net-work across the country, and across keyinternational trade lanes such as China, Europe

and Southeast Asia.”Most logistics providers Business India spoke to

– Blue Dart, Expressit, TNT India, DHL, Gati, Red-ington, Arshiya International, Transport Corpora-tion of India, Damco, Redington, UPS, Allcargoand V-Trans amongst them – signalled their indus-try’s emergence from the economic downturn andits resolve to stay the course for the long term.

Encashing the opportunities is Expressit Logis-tics Worldwide Ltd, a key operator in the Rs9,000crore express delivery business within the overalllogistics market. It is embarking on an expansionplan, adding 19 branches over the last year,according to its chairman and managing director,Ashis Nain. “Our recent tie-up with Brussels-basedBelgian Post International (BPI) – rated as one ofthe top five postal agencies worldwide – gives us aglobal reach to over 180 countries,” he says. Whilethis partnership will help Expressit offer its cus-tomers in India a reliable, cost-effective alternativefor deliveries into Europe, BPI’s US subsidiary willgain it access to the North American market.

OUT OF THE DOLDRUMSDHL has invested over $315 million in the Indianmarket over the last five to six years, including$163 million for acquiring Blue Dart. ProjectingIndia to be the fastest growing country in Asia forlife science logistics by 2014, DHL ‘Global Forwarding’ has invested $15 million tostrengthen its infrastructure at Mumbai, Hyder-abad and Singapore to bolster its internationalfreight capabilities for the life science industry.

Seeing very positive signs of recovery from theeconomic downturn, Dhingra says Blue Dartrealises the need to be cautious at this stage andnot let go the advantages it has built over the lastyear and a half. “In the tight scenario that had hitus, all organisations, big or small, geared up to domore with less and this definitely increased effi-ciencies,” he asserts. “We need to hold on to theseefficiencies in order to bet for a better future.”

Decelerating volume growth during the down-turn had affected the margins of Blue Dart, whichessentially has a fixed cost based business model.Its revenues dipped 7.09 per cent to Rs912.83crore in 2009 from Rs982.53 crore the previous

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year. EBIDTA slumped 16.41 per cent, fromRs133.18 crore to Rs111.33 crore, and PAT by21.52 per cent from Rs77.35 crore to Rs60.7 crore.

“DHL’s strong foothold in India helped itcombat the slowdown,” acknowledges MalcolmMonteiro, senior VP & area director for SouthAsia, DHL Express Asia Pacific. “As freight ratessteadily declined and freight volumes wereaffected in 2008, they were at times shifted fromair to ocean freight.” The first two quarters of2009 were significantly affected, but the last twoquarters saw substantial improvement, as well asan increase in volumes.

Blue Dart’s short term plan was to keep rollingout new, innovative and customised solutions for specific needs of different customers and

verticals, as part of 25 new product and serviceinitiatives, mentions Ketan Kulkarni, VP andhead, marketing, corporate communications andsustainability, Blue Dart. “The new initiatives byBlue Dart will upgrade its product range andimprove service quality, thereby offering cus-tomers state-of-the-art air and ground expresssolutions across the country.”

According to him, the organised express indus-try in India, comprising the air express segmentworth Rs1,250 crore to Rs1,500 crore, and theground express segment, with revenues of betweenRs1,500 crore and Rs1,800 crore, has grown 15 to17 per cent over the past decade. He expects it togrow by 17 per cent for the next five years.

Christoph Remund, CEO, DHL Lemuir Logis-tics Pvt Ltd, says last year DHL introduced newocean freight services such as a link between theICDs in Ludhiana and Nhava Sheva, and less-than-container-load (LCL) – a shipment not largeenough to fill a standard cargo container – services

connecting Chennai to Felixstowe, the largestcontainer port in the UK, in Suffolk, Cochin withEurope and North America, and Nhava Sheva toLos Angeles. DHL also opened an ocean freight ter-minal in Kochi recently to tap the growing marketof the south. DHL Lemuir is a 76:24 joint ventureof DP DHL and Lemuir formed in 2007, and com-prising the two brands of DHL Global Forwardingand DHL Supply Chain.

India is one of the fastest-growing countriesand is a major engine of growth for DHL’s busi-ness in South Asia. “Our Strategy 2015 defines aclear roadmap for the future that is perceived pos-itively by our customers, investors and employ-ees,” says Monteiro. “India in particular is a keymarket which will drive growth for us globally.”

Its entrepreneurial spirit and theprospects created in the eximmarkets present DHL withimmense growth opportunities.

A FOCUS MARKETDamco, the new combinedbrand of the Copenhagen-basedA.P. Møller-Maersk Group’slogistics activities, is anotherlogistics transnational thatviews India as a focus market.Sorensen says his company hasopened new offices in Hyder-abad, Nagpur, Rajkot, Jaipur andJodhpur since 2007 and thisexpanding office network willhelp reach out into the hinter-land and to locations wheregrowth is visible.

Damco started as a single-office operation in 1992 and is

today a 17-office network with over 300 logisticsprofessionals. “We will consider opening newoffices and other facilities regularly and willinvest in additional resources where necessary,”remarks Sorensen.

Terming India one of the most exciting logis-tics markets, he sees the country’s industrial land-scape changing very fast. “The supply chains ofIndian manufacturers are becoming global asthey export to a global clientele and source rawmaterials from overseas,” he notes. “Because ofthis, Indian companies are looking for profes-sional logistics service providers who have thecapability to manage these requirements.”Sorensen says Damco managed to grow its busi-ness in India even when the overall export-importmarket fell due to lower demand in the US andEurope during the global downturn in 2008-09.“We managed higher ocean freight cargo in com-parison to 2008 by not only retaining our cus-tomers, but also by acquiring new customers,” he

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claims. “We also reviewed our costs to drive outall possible inefficiencies and are happy to comeout of the slowdown.”

Seksaria is encouraged by the governmentfinally heeding the recommendation of theIndian Council for Research on International Eco-nomic Relations (ICRIER) to open up the retailsector. The Council foresees the opening of a largehypermarket having but a small and temporaryimpact on existing small retailers in the vicinity.It sees ample scope for growth for both kinds ofretail models alongside.

While organised retail is only 5 per cent ofIndia’s Rs18 lakh crore retail market, it is growingannually at 40 to 50 per cent as against the overallretail growth of 8 to 10 per cent. Seksaria says foodand grocery form 60 per cent of the overall retailmarket, but only 11.5 per cent of the organisedretail market, and will be the key driver of organ-ised retail growth in India. She recalls how manyretailers, including Reliance Retail and AV Birla’sMore, that went on a spree in setting up outlets,

had to shutter many of them in the last downturnand a prominent name, Subhiksha, went bust.

Today, there are some positives favouringorganised retail, not least the 40 per cent declinein rentals for commercial property since 2007.The tax system has been slightly simplified as aprelude to the introduction of GST, and retailersmay now buy products directly from farmers. Butsome obstacles remain, such as poor roads andunreliable power supply, which will take long tofix and will require expensive solutions. Domesticretailers have been frustrated by the simple task of

getting the right quantities ofproducts to their shelves.

Vineet Agarwal, executivedirector of Transport Corpora-tion of India (TCI), prophesiedquite accurately in last year’sLogistics survey that India’seconomy would revive by end-2009 or early 2010 and that hiscompany would attempt tograduate to high-margin rev-enue segments. TCI posted anincome of Rs1,524.72 crore in2009-10 compared toRs1,358.28 crore in 2008-09, itsprofit after tax soaring 51.66 percent to Rs42.98 crore. “We areprojecting to grow to a Rs2,000crore group in the coming finan-cial year,” he says.

TCI also expanded its distrib-ution capabilities to 13,000 loca-tions, and added 47 to its 1,200domestic branches and 500employees to its strength of

6,000 (apart from a 20,000-strong outsourcedteam). Agarwal says capex of Rs160 crore has beenplanned for this year, Rs70 crore for buying trucks,Rs50 crore for purchasing a ship, and the balanceRs40 crore towards logistics hub centres and ware-housing equipment. The company operates andmanages 7,000 trucks and trailers that traversealmost 45 crore km every year and plans to expandthis fleet by 1,000 over the next four years.

Agarwal feels India’s logistics industry is trans-

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forming from a conventional transportation con-cept to being perceived now as a better way ofmanaging the supply chain. Large investments inthe transport sector have led to an expansion oftransport infrastructure and emergence of multi-modal transport systems, training centres ofexcellence and reduction in arrears of over-agedassets. Globalisation has also made companiesfocus more on their core manufacturing processesand outsource their logistics requirements tologistics service providers. “This is definitely tak-ing the sector to the strong growth curve,” heremarks. “Companies across sectors like FMCG,retail, pharma and automotive are increasinglyoutsourcing their logistics requirement to thirdparty and fourth party service-providers.”

TCI jointly operates a 3,500tonne ship with Denmark’s Scan-Trans, and with Japan’s Mitsui &Co has formed the joint ventureTransystem Logistics Pvt Ltd thatis a dedicated supply chain solu-tions provider for Toyota Kir-loskar Motors Ltd. TCI acquiredReliance Logistics’ 51 per centstake for Rs1 crore in InfiniteLogistics Solutions, a JV withstate-owned Container Corp. ofIndia Ltd (CONCOR). Now a sub-sidiary of TCI, the joint companywill make use of core competen-cies of both the parent compa-

nies in multi-modal cargo transportation andsupply chain logistics and rail cargo movements.

“This year will be an extremely exciting one forus with our core business adding momentum,three of our five planned FTWZs becoming opera-tional, and 10 to 12 trains being added to our railoperations with strategic siding infrastructurebeing developed pan India, all while global economic conditions are improving,” says AjayMittal, CMD, Arshiya. Five ‘domestic distriparks’have been planned pan-India, complementingthe FTWZ network. The first of the distriparks willbe set up in Khurja by October.

Mittal says his company negotiated the eco-nomic downturn successfully by securing full

financial closure of Rs2,700 crore for the firstphase of its FTWZs, and rail and distripark pro-jects. This includes the Rs532 crore, Rs433 croreand Rs492 crore FTWZs in Panvel, Khurja andNagpur respectively. Phase 1 of its rail project willcost Rs626 crore and the distriparks, Rs617 crore.“Arshiya’s FTWZ is set to employ 2,000 to 2,500 atfull-scale operations,” he says.

EXPANDING WHILE IN RECESSIONApart from the three FTWZs and two distriparksbecoming operational by March 2011, Arshiyawill run a minimum of 30 trains across sevenstrategic rail terminals. “We have 1,200 captivelogistics customers with a nine-year logistics andfive-year supply chain lineage ready to leverageour infrastructure services,” he adds. “We haveoffices across nine Indian cities covering all themajor trading centres and have a network in over140 countries.” Arshiya registered revenues of$115.82 million in 2009-10 as against $111.76million the year before, a 4 per cent increase.EBIDTA increased 5 per cent, from $18.9 millionto $19.9 million, while profit after tax rose 49 percent, from $14.58 million to $21.77 million. Itsconsolidated revenues showed a similar growthfrom Rs502.96 crore to Rs521.19 crore.

“Arshiya’s single window concept starts rightfrom the documentation stage and moves on toorder management, shipment planning anddelivery,” says S. Raghunathan, head of logisticsat Rohm & Hass (India). “Apart from addingvalue to the entire system, it also eases our deci-sion-making process through its shipment-tracking mechanism.”

V-Trans managing director Mahendra Shah sayshis company expanded its network in the recentrecessionary phase, and increased its workforceand strengthened its service standards. “Aggressivemarketing is crucial to expand share in a shrinkingmarket,” he mentions. “While our market sharewas large in certain verticals, we have becomeaggressive in those we were not operating in andthis strategy has helped us increase our business.”He adds that the going became tough for logisticsfirms that got carried away by good times and set high growth plans by working on highly

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competitive rates and over-extending credit. Hisfirm recorded revenue of Rs250 crore in 2009-10,up from Rs200 crore the year before.

V-Trans is also opening a ‘super hub’ at Vapithis month which will support the entire organi-sation by improving service efficiency and cut-ting down cost. Another such hub will come up inDelhi. The company is allocating Rs100 crore overthe next three years for the super hubs and tocater to warehousing and network expansion,and capital cost for automation. While it proposesto raise debt for this purpose, it may also considerhaving on board a finance company as a strategicpartner through the equity route. Several PE firmshave approached V-Trans in the past two yearswith offers of funds for its financial requirements.

One of the companies affected by the downturnwas Allcargo Global Logistics. Its total income thathad surged from Rs1,618.61 crore in CY07 toRs2,324.72 crore in CY08, sagged to Rs2,089.51

crore in CY09. But PAT grew 20.7 per cent, fromRs121.58 crore to Rs140.73 crore and EBITDA by7.2 per cent, from Rs230.44 crore to Rs247.1 crore.“This has been possible through discreet cost-cut-ting steps and thoughtful steps taken in early2009,” explains CMD, Shashi Kiran Shetty.

“We are looking for complete acquisitionopportunities in Indian or global organisations inthe same business to increase our footprint andofferings across the supply chain,” he notes. “Wehave picked up minority stakes in existing com-panies and are in advanced stages of acquisitionin a couple of Far-Eastern companies.”

Indicating the strong growth curve India’slogistics industry is now on, Shetty believes thatwhile private players have done a ‘fabulous job’,the country lacks infrastructure and transparency.“The government lacks vision as to how it is goingto organise logistics as an industry,” he says.“From our point of view, the industry must beregarded as an infrastructure industry and should

be given all benefits and support that the infra-structure industry today enjoys in the country.”

US-based United Parcel Service (UPS), theworld’s largest package delivery company thatnotched revenues of $45.3 billion for 2009, hadexpanded its reach in India through a strategicalliance with AFL (Air Freight Pvt Ltd) in 2008,when its revenues had been a more robust $51.5billion. The extensive network of AFL, a providerof air freight-forwarding, air express, and third-party logistics (3PL) services, has exclusively pro-moted UPS’s international express deliveryservice in India, says Mark Khambatta, countrymanager, UPS India.

UPS gained 37 per cent in its 2010 1Q earningsover the same period last year, with improvedgrowth in the international package and supplychain businesses. Besides, increased operatingleverage resulted in margin expansion in all busi-ness segments. “All major regions of the worldexperienced export volume improvements, andAsia led the way with over 20 per cent gains whencompared to the same period last year,” notesKhambatta. “Also, during the quarter, UPS saw avolume jump of nearly 40 per cent in the Asia-to-Europe trade lanes.”

WORTH IN COLLABORATIONSLogistics players are seeing worth in collaborationas one player can synergise and complement hisservices with another. For instance, the MoU lead-ing to an agency agreement between UPS SupplyChain Solutions (SCS) India Pvt Ltd and AFL aims to significantly expand UPS’s presence inIndia, with a planned rollout to offer more than130 Field Stocking Locations (FSLs) to supportcustomers in India and around the world.

“The tie-up extends our service parts logistics(post sales) product offering, including FSL andfinal-mile delivery service,” mentions Kham-batta. “It also expands our presence in India andbenefits customers who require field stockingfacilities and a transportation network to supportsame-day and next-business-day delivery of critical service parts.”

Bangalore’s Indelox Services Pvt Ltd too hasfound a niche for itself after commencing opera-tions in 2000. It has grown at a steady 25 percent CAGR in the supply chain managementbusiness, providing in-house services to organi-sations which outsource their commercial oper-ations for in-bound, out-bound and after-marketcustomer services. “We provide the entire chainof functions from procurement to production,finished goods to customer and on the reverselogistics for warranty and defective repairs,” saysIndelox managing director G.R.S. Jeevan. “Wehave built up a broad customer base for which we have been investing extensively in IT and

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infrastructure to scale up operations and enhancecapacities in niche areas.”

Indelox has also been approached by govern-ment sectors that are now considering outsourc-ing, which had hitherto not been the case. “Thisvividly proves the paradigm shift in the attitudeof partnering with private entities and paving theway for smaller companies to grow in a healthymanner alongside large volume players,” saysJeevan. “The introduction of the goods and ser-vices tax and the consequent facilitated move-ment of stocks across states hold further promisefor our industry.”

His company has branches at Chennai andHyderabad, with plans to increase offices in otherareas of the country as well. Indelox covers theentire supply chain activity, including vendormanaged inventory (VMI), order managementand processing, specific customised services, spe-cial packing services and reverse logistics. In VMI,a third party logistics provider can ensure that abuyer has the required level of inventory byadjusting the demand and supply gaps. Reverselogistics stands for all operations related to thereuse of products and materials, specifically theprocess of moving goods from their typical final

destination for the purpose of capturing value, orproper disposal.

Abhik Mitra, MD, TNT India, reckons that withIndia’s GDP set to grow at over 9 per cent per yearand the manufacturing sector enjoying doubledigit growth rates, the domestic logistics industrywill grow at over 20 per cent per year over the nextthree to five years. TNT’s own growth strategyenvisages expansion of existing facilities and net-work to reach new areas, modernisation of exist-ing facilities, enhancing automation levels in allprocesses through investment in technology, andsustaining investments in human resourcethrough training, especially in service logistics,and in key verticals like life sciences, automationand high technology.

Gati managing director and CEO MahendraAgarwal is also optimistic about the growthprospects of the express distribution and logisticsindustry, especially on the back of the quick eco-nomic recovery. But while he sees a good tractionin business in the industry, he indicates cost ratio-nalisation as an area of constant focus by hisclients. He is, however, enthused by the latestfinance bill which, he says, lent support to theindustry by way of some sops, especially in theareas of cold chain solutions.

In 2007, Gati acquired Kausar India Ltd, a coldchain solutions company, which is now a sub-sidiary. Gati also partners China Post in Chinaand General Logistics Systems in Europe.Recently, it announced a tie-up with Bangladesh’sXpress International to provide end-to-end solu-tions, especially for surface movement, betweenthe two countries.

SET TO GROWThe company sees enormous potential from thistie-up, as daily 700 to 750 trucks cross the borderfrom India to Bangladesh carrying engineeringequipment and parts, automobile spares, pharmaproducts, textile yarn and gift items. Around 150to 175 trucks also come into India fromBangladesh, carrying jute products, hilsa fish andcotton/textile waste for industry use.

“Gati was already doing business withBangladesh, but this formal engagement withXpress International will strengthen our networkto carry out our business even more successfully,”maintains Sameer Khatri, who is Gati’s chief officer for international business. He sees hugepotential in this market and expects good rev-enues during the first year and business to grow at30 to 40 per cent year-on-year.

While Redington’s Krishnan feels India’s logis-tics industry is on a strong growth curve, he indi-cates that it accounts for but 3 per cent of theworld’s logistics market. Even in this, 80 per centis in the grasp of the unorganised sector. At its

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39th position in the global logistics performanceindex, India offers significant development andgrowth opportunities, he says.

“Also in India, our logistics cost is high at 14per cent of GDP, whereas it is 9 per cent in westerncountries,” he points out. “The development ofinfrastructure for better connectivity will compela focus on supply chain efficiency and marshaltechnology for modern warehousing facilities.”In view of all this, he deems it likely that thegrowth target of 16 per cent for logistics by 2010-11 is attainable and may even be exceeded.

PE firms have been showing interest in invest-ing in his company, but Krishnan says that duringthe year, no money has been raised either at theparent or the subsidiary level from any PE player.Besides, he says Redington has not entered intoany significant alliances to expand its services,though it constantly has transaction specific tie-ups. All its growth till date too has been throughthe greenfield mode (organic).

Ankur Rudra and Soumitra Chatterjee, analystswith Execution Noble Ltd, the country branch ofGreenwich-based international investment bank-ing group of Execution Noble LLC, report thatRedington is a high quality IT hardware distribu-tor, which has built strong competitive advan-tages through financing channel partners andafter-sales service in a commoditised industry.“Increasing penetration in its core Indian andMEA [Middle East and Africa] markets and theability to increase leverage in its NBFC arm is likelyto expand return ratios and drive earnings

growth,” they note. “We initiate with a ‘buy’.”Even airlines are now seeing worth in ventur-

ing into the logistics sector, as with Kingfisher’slaunch in February of Kingfisher Xpress, a door-to-door cargo delivery service. Kingfisher Xpressclaims that its Same Day service is India’s first andonly same day delivery by air service, with amoney-back guarantee.

SAME DAY SERVICETerming this yet another market first from King-fisher Airlines, Prakash Mirpuri, vice president ofthe UB Group’s Corporate Communications, saysthe service promises the pick up of shipments fromthe sender’s doorstep to the recipient’s doorstepthe same day. “The pick up facility is on offer inMumbai, New Delhi, Bangalore, Hyderabad, Chen-nai and Kolkata with guaranteed same day deliveryacross 18 cities, including these six, as also Bagdo-gra, Coimbatore, Kochi, Goa, Guwahati, Indore,Raipur, Ranchi, Lucknow, Nagpur, Pune and Srina-gar,” he mentions. “Our confidence in this servicereflects in our money back guarantee.”

Manoj Mohta, head of CRISIL Research, seesthe expected implementation of GST and thehigher 3PL penetration leading to an overall 10 to25 per cent operational savings. “However, thiswill involve not only a change in mindset of theuser industries, but also demand greater ability oflogistics players to offer integrated solutionsencompassing modes, infrastructure and IT networking,” he adds.

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Expressdistribution andwarehousing isthe name of thegame