1

A CRITCAL ANALYSIS

REPORT ON

SICAL LOGISTIC

BY: AVINIT KUMAR

2

Acknowledgement

“It is not possible to prepare a project report without the assistance &

encouragement of other people. This one is certainly no exception.”

On the very outset of this report, I would like to extend my sincere & heartfelt

obligation towards all the personages who have helped me in this endeavor.

Without their active guidance, help, cooperation & encouragement, I would not

have made headway in the project.

I am ineffably indebted to TAMAL DATTA CHAUDHRI for conscientious

guidance and encouragement to accomplish this assignment.

I am extremely thankful and pay my gratitude to my faculty TAMAL DATTA

CHAUDHRI for his valuable guidance and support on completion of this project

in it’s presently.

I extend my gratitude to CALCUTTA BUSINESS SCHOOL for giving me this

opportunity.

I also acknowledge with a deep sense of reverence, my gratitude towards my

parents and member of my family, who has always supported me morally as

well as economically.

At last but not least gratitude goes to all of my friends who directly or indirectly

helped me to complete this project report.

Any omission in this brief acknowledgement does not mean lack of gratitude.

Thanking You

AVINIT KUMAR

3

CONTENT

Sl.no Particulars Pg.no

1 COMPANY PROFILE

2 PRODUCT & SERVICES

3 THE LOGISTICS OUTSOURCING CONTINUUM

4 STRUCTURE OF THE LOGISTICS INDUSTRY

5 INDUSTRY PERFORMANCE

6 MISSION & VISION

7 EXECUTIVE SUMMARY OF SICAL LOGISTIC

8 INDIAN LOGISTICS INDUSTRY

9 PROMOTER

10 GOVERNMENT INITIATIVE IN THE LOGISTIC

SECTOR

11 KEY CHALLENGES OF SICAL LOGISTICS

12 SICAL’S EXPERTISE:

13 MAJOR PLAYERS IN LOGISTICS SEGMENT

14 LOGISTICS SEGMENT

15 PORTER'S FIVE FORCE MODEL

16 MAJOR CLIENT

17 CUSTOMER PROFILE

18 KEY RATIOS AND RATIO ANALYSIS

19 COMPETITOR

20 (COST OF EQUITY

21 RRE

22 STOCK PRICE VARIATION

23 STOCK PRICE COMPARISION AND ANALYSIS

24 CREDIT RISK ASSESSMENT

25 PROJECT AND PLAN IN FUTURE

26 ACHIEVEMENTS

27 AWARDS

28 CONCLUSION

Company Profile

4

Sical Logistics Ltd is India's leading provider of integrated solutions for offshore

logistics and multi-modal logistics for bulk and containerized cargo. The company is

the handler of more than 26 million tons of bulk group cargo and 500,000 TEUs of

containerized cargo annually. The company owns and operates a container terminal at

Tuticorin in joint venture with the Port of Singapore Authority, which is engaged in

ports and terminals business. The company provides end-to-end solutions in Bulk

Logistics-stevedoring, which includes port terminals, customs house and shipping

agency, trucking, railroad and warehousing; Container logistics, which includes

container terminals, ICD and CFS; and Offshore Logistics, which includes platform

supply vessel and cutter suction dredger. Sical Logistics Ltd was incorporated in the

year 1955 as a private limited company with the name South India Corporation

Agencies Ltd. In the year 1972, the company incorporated Agro Cargo Transport to

provide trucking services to group companies. Also, they established the Ship Repair

Division with their base at Chennai. In the year 1988, the company diversified in the

area of fabrication and building of steel barges electro hydraulic grabs pay-loader

buckets and survey launches. In the year 1989, the Ship Repair Division undertook

fabrication of floating platform storage tanks as sub-contractors for Chokkani

International Ltd. In the year 1996, Agro Cargo Transport merged with the company,

which is currently operating as Sical's trucking division. In July 1998, the company

signed a joint venture agreement with PSA India Pte Ltd, Singapore and Nur

Investments and Trading Pte Ltd for development management and operation of the

seventh berth at Tuticorin as a full-fledged container terminal on BOT basis. In the

year 1999, MAC Agro Industries Ltd was amalgamated with the company. Also, the

company won a major long-term coal handling contract on BOT basis from Tamil

Nadu Electricity Board for the new port at Ennore. In the year 2000, the company

entered into a joint venture agreement with Coeclerici Logistics, Italy and formed a

50:50 company, namely SICAL Coeclerici Logistics Ltd. In addition, the company

hived off their profit making auto components division to a joint venture company.

During the year 2004-05, the company added new business lines in their port

handling and trucking divisions. In November 2005, the company hived off non-core

business to focus mainly on logistics business. In February 2006, they incorporated

MAC Oil Palm Ltd to focus on the palm oil business. The company made an

application to the Indian Railways to operate container trains on an all-India license

for export-import and domestic cargo including all the four categories offered by the

Indian Railways. The company changed their name form South India Corporation

(Agencies) Ltd to Sical Logistics Ltd with effect from February 14, 2006. In April

2006, the Maharashtra Airport Development Company issued the letter of intent to

the company for setting up a rail terminal as part of the proposed Multi-modal

International Hub Airport at Nagpur During the year 2006-07, the company formed a

special purpose vehicle, namely Nagpur Sical Gupto Logistics Ltd for the road

terminal at MIHAN. For the road terminal at MIHAN, a special purpose vehicle,

Nagpur Sical Gupta Road Terminal Ltd, was formed with Sical as the lead

consortium partner with 51% stake; the state-run MADC owns 26% of equity for

contributing land towards the project. The company transferred their oil palm

undertaking to their wholly owned subsidiary Mac Oil Palm Ltd through a Scheme of

5

Arrangement. In addition, they sold their refractory division and executed the

Business Transfer Agreements for their cytozyme and flexible shafts. In September

2006, the company acquired Singapore-based Bergen Offshore Logistics Pte Ltd, a

provider of specialized logistics for offshore oil and gas exploration. During the year

2007-08, the company hived off their trading, services and coffee plantation

undertakings to Sicagen India Ltd with effect from October 1, 2006. In addition, the

company transferred the shareholding in Sical Distriparks Ltd to Sical Infra Assets

Ltd. In August 2007, they acquired cutter suction dredger, which is currently

operating in China. In August 2007, the company sold their manufacturing facilities

and assets of their auto components division, Indrad Auto Components, to Lucas

TVS Ltd for Rs 14.69 crore. In March 2008, the company's first container train

flagged off at Hatta Road station in Madhya Pradesh. The company was awarded the

Best Business Partner Award for having handled the highest volume of cargo at

Chennai Port during the financial year 2007-08. Also, the company was selected as

the Organisation of Excellence in Traffic Performance for the year 2007-08 by the

Tuticorin Port Trust. The company was awarded the Best Stevedorer for the year

2008-09 for handling highest volume of coal at Ennore Port. In August 2008, the

company initiated the operations of their second container train from Melpakkam rail

terminal; 70 km form Chennai to a private rail sliding at Patil, near Gurgaon. In

February 2009, the company signed a strategic partnership with MMTC Ltd for their

Greenfield iron ore terminal project at Ennore Port. In April 2009, the company

signed Business Transfer Agreement for transfer of their drums division to Sicagen

India Ltd effective from April 01, 2009. In May 2009, the company signed a MoU

with Mitsui OSK Lines Ltd for the launch of a joint venture to operate a completed

car yard at Ennore Port near Chennai. The joint venture will be engaged in yard

operations such as storage and preparation for loading of vehicles at the export port,

of all operations for exports of Nissan vehicles, for which MOL has already secured a

contract.

6

Products & Services

Product Name

% of Stock

Sales (Cr.)

Port Services Income

68.7

343.27

Transportation

28.9

144.24

Other Services

2.5

12.47

Finished Goods

Product Name Value (Rs.Cr) % Sales Turnover

Other Services 12.47 2.49

Transportation 144.24 28.85

Port Services Income 343.27 68.66

The logistics outsourcing continuum

7

Figure 1 demonstrates, however, there is a wide range of intermediate positions

offering varying combinations of internal and external provision. In real terms, the

two extreme positions are quite rare, with most large firms seeking to strike a balance

of internal and external provision for strategic reasons. Importantly, however, by far

the dominant trend is for increased outsourcing. It was estimated in the mid-2000s

that only 5 percent of the global logistics industry was outsourced (2008). This figure,

however, varies significantly from market to market, ranging from 2 percent in China

up to 40 percent in the UK in the mid-2000s, with the figures for France, Germany,

the US and Europe as a whole being 22, 28, 19 and 25 percent, respectively. In

dynamic terms, however, the third-party logistics market is growing rapidly in most

territories: in China, for example, the outsourced logistics market was estimated to be

growing at 30 percent per year in the late 2000s

The logistics outsourcing continuum (Fig 1)

8

Structure of the logistics industry

General arguments about the nature and growing significance of logistics need to be

accompanied by recognition that logistics services are hugely variable across, time,

space and GPNs, and are provided by a rich array of inter-linked corporate actors. We

can develop these arguments in five stages. The first point to make is that the inherent

nature of logistics systems has changed dramatically in recent decades (see Figure 2

for a stylized version). One shorthand way of describing this broad shift is from

inventory-based, or ‘push’, logistics to replenishment-based, or ‘pull’, logistics. In

‘traditional’ arrangements of the goods flow within GPNs (top half of Figure 2), there

was a storage function acting as a buffer between raw materials suppliers and

manufacturers, with a similar inventory-based warehouse on the customer side.

Delays were common at all stages, leading to inventory accumulation at the various

storage points. In contemporary ‘demand-pull’ logistics systems, by contrast, many of

these costly storage facilities are eliminated (bottom half of Figure 2). Reverse flows

– associated with product returns and recycling – are part of the system, and

warehousing is kept to a minimum, usually in the form of a distribution center that is

throughput-oriented excellent overview of the role of retail capital in driving many of

these changes). While these reduced inventory systems are generally characterized as

being lean, some commentators have contrasted lean supply networks – with an

emphasis on efficiency and predictability of supply of relatively standardized

commodities – with the emergence of agile networks wherein the imperative is rapid

response to shifts in market demand for fashion goods

The changing nature of logistics requirements (Fig-2)

9

The changing nature of knowledge flows within supply networks

Figure provides a useful grid for conceptualizing the different diversification

strategies individual firms may pursue. On the one hand, they may seek to enhance

the range of asset-based services they provide, developing basic transport and

warehousing services into more sophisticated SCM and DC operations. On the other

hand, they may seek to develop the level of non-asset-based management services

they offer.

10

As a result of these ongoing diversification processes – and although the empirical

evidence is somewhat patchy and anecdotal – it is clear that the range of services

offered by some providers now goes well beyond those offered by traditional 3PL

firms including:

• Manufacturing support: undertaking or supporting sourcing, managing

procurement, completing light manufacturing and assembly activities;

• Origin management: managing vendors, purchase orders, in-country

collections, order consolidation;

• Freight management: managing and coordinating global freight movements

across all major modes of transport;

• Destination management: managing downstream operations, port to DC

delivery, deconsolidation, customs brokerage, demurrage, quality checking;

• Contract distribution: storage and delivery, inventory management, DC

management, pre-retailing (labelling etc.), reverse logistics, retail delivery,

home delivery.

11

More specific growth areas include

• Transnational supply chain coordination: the integration of contract logistics

activities at both source and destination into end-to-end supply chain solutions;

• Reverse logistics: handling the inherently complex and inefficient processes of

good returns from customers. Estimated to be a global market worth US$35

billion in the mid-2000s; Packaging: by outsourcing packaging, enables client firms to gain efficiencies by

decoupling product manufacture from packaging for specific markets (and also

customized marketing initiatives and product combinations);

• Service parts logistics: found particularly in high-tech sectors, an involving

ensuring post-sales high-value or critical parts reach a spatially extensive

customer base quickly and efficiently;

• Inbound to manufacturing (I2M): the SCM of the inbound flow of materials

from suppliers to the point of production. Having offered a broad overview of the changing market and organizational,

technological and regulatory characteristics in this section, in the next two sections

we look in more detail at economic and social upgrading within the logistics industry.

12

Industry Performance

Company

Name

Current Price

(Rs.)

Current

Chg

(%)

Week

Price

(Rs.)

Week Chg

(%)

Month

Price

(Rs.)

Month

Chg

(%)

6 Month

Price

(Rs.)

6 Month

Chg

(%)

Year

Price

(Rs.)

Year

Chg

(%)

ABC India 99.30 0 101.10 -1.78 97.05 2.32 94.90 4.64 148.00 -32.91

Aegis Logistics 148.50 -1.33 149.70 -0.80 148.10 0.27 124.90 18.90 149.05 -0.37

Agarwal Indl. Corp 153.95 6.65 145.05 6.14 148.15 3.91 76.80 100.46 131.05 17.47

Allcargo Logistics 149.10 -2.42 153.05 -2.58 133.35 11.81 82.90 79.86 114.15 30.62

Aqua Logistics 1.36 0.00 1.79 -24.02 2.58 -47.29 2.31 -41.13 14.02 -90.30

Arshiya 12.43 -4.53 13.33 -6.75 12.68 -1.97 12.12 2.56 26.95 -53.88

Balurghat Tech 1.95 4.84 1.65 18.18 1.65 18.18 2.70 -27.78 1.43 36.36

Chartered Logistics 0 0 12.11 0 11.23 0 10.55 0 14.05 0

Coastal Roadways 13.65 0.00 12.72 7.31 11.70 16.67 20.20 -32.43 21.60 -36.81

Container Corp 822.30 0.46 843.55 -2.52 719.30 14.32 696.70 18.03 710.00 15.82

Frontline Corp 21.50 0.00 21.50 0.00 21.50 0.00 21.50 0.00 21.50 0.00

Gateway Distriparks 146.05 -1.38 141.85 2.96 132.15 10.52 107.80 35.48 125.90 16.00

GATI 75.85 5.57 63.70 19.07 61.30 23.74 24.65 207.71 29.15 160.21

Inter St. Oil Carrie 7.47 0.00 7.47 0.00 7.86 -4.96 5.98 24.92 7.30 2.33

North Eastern Carrying 62.50 -3.62 63.10 -0.95 72.00 -13.19 69.00 -9.42 76.05 -17.82

Patel Integrated Log 14.80 -3.58 15.25 -2.95 15.20 -2.63 8.61 71.89 19.50 -24.10

Sanco Trans 198.00 3.83 180.00 10.00 160.35 23.48 148.50 33.33 197.50 0.25

SER Inds. 11.38 0.00 10.84 4.98 11.40 -0.18 11.41 -0.26 11.80 -3.56

Sical Logistics 55.00 1.48 53.50 2.80 51.00 7.84 57.00 -3.51 61.30 -10.28

Tiger Logistics (I) 67.95 5.84 73.00 -6.92 73.50 -7.55 69.10 -1.66 0 0

13

14

Vision

Become a leader in the industry known for

pioneering solutions in logistics, worldwide.

Mission

"To be the most Reliable, Trusted and Preferred

logistics partner across Business, providing Cost

Effective, Innovative and Best-Fit solutions for

customers, ultimately enhancing value for its all

Stakeholders".

15

Executive Summary of SICAL Logistic

The logistics sector in India is evolving rapidly and its growth is dominated

by the interplay of infrastructure, technology and new types of service

providers that will determine whether the industry is able to help its

customers to reduce logistics costs and provide effective services or not

Changing government policies on taxation and regulation of service

providers is going to play an important role in this process

The logistics sector has attracted a large amount of investment in the past

years and in future the sector could witness the same due to rising demand

for logistics driven by industries like automobile, retail, pharma etc.

There is significant rise in the demand for third party logistics providers in

the sector as well, which is led by TVS Logistics today and has few capable

competitor

The sector provides lucrative business opportunities today for new players

in terms of margins, low-entry barriers and high growth prospects

Proper infrastructure support by the government and competition from the

unorganized sector are major challenges in the growth of the logistics sector

16

Indian Logistics Industry

The Logistics industry includes five broad segments – ocean freight, rail

freight, air freight, trucking and third party Logistics (3PL) services

The current size of the Indian Logistics Industry is estimated around $225bn

and is expected to reach around $350bn by 2015

As per industry estimates as provided by the Fitch Rating Agency, there is a

positive future outlook for the Indian Logistics Industry and it is estimated

that the industry will grow at 15-20% over the next few years

Several factors helped the growth of logistics industry in India over the last

decade that include changing tax system as well as a rapid growth in

industries such as automobile, pharmaceuticals, FMCG and retail

70% of the total domestic product is transported through the road network

and 15% through the rail network. Domestic companies are willing to

expand their efficiency to meet rising demand globally according to a study

by industry body ASSOCHAM

Logistics costs in India are estimated to be approximately 13% of GDP

which is considerably high when compared to the corresponding figures for

other major economies of the world (as per World Bank 2010 report). For

example in 2011 the logistics costs in the European Countries accounted for

7.15% of GDP (as per an article in ‘The Hindu’)

Higher logistics costs are mainly due to poor infrastructure facilities in the

country. The higher logistics cost represents higher products/services cost in

the international market

The country’s organized logistics market represents 6% of the total market

17

The three major contributors for the growth of logistics industry are:

emergence of organized retail, increase in foreign trade and India becoming

a global manufacturing hub

Growth in the logistics industry depends on infrastructure availability and

involvement of private players and increased government spending which will

catalyze the growth in the industry

Backed by strong economic fundamentals, the Indian Logistics Industry is

slated for a 15% CAGR to size up to USD $350bn by 2015

Key Trends in the Indian Logistics Industry

Rising investment in the rail and port spaces also fuels growth in allied

industries like wagon manufacturing, port handling equipment, railway

electrification systems and construction companies

3PL Services: Logistics services like transportation, warehousing, cross

docking, inventory management, packing and freight forwarding are all part

of third party logistics services. Companies in India currently outsource an

estimated 52% of logistics, and 3PL represents only 1% of logistics cost. As

of now, the 3PL activity is limited to only few industries like automotive, IT

hardware, telecom and infrastructure equipment

Global Players: The industry is becoming more competent with entry of

global giants like Gazeley Broekman (Walmart’s Logistics partner), CH

Robinson and Kerry logistics and large Indian Corporate houses like Tata,

Reliance and

Bharti group. A series of mergers and acquisitions like DHL acquiring Blue

18

Dart, TNT acquiring Speedage Express Cargo Service and Fedex buying

over Pafex, are also leading to consolidation of the industry at various levels

and segments

Express Logistics: Organized players have a monopoly over the express

logistics industry. 65% of express business is in the hands of organized

players, while semi-organized and unorganized players account for 25% and

then the remaining 10% of the market by EMS Speed Post. On the domestic

front, unorganized players hold 41% of the market share based on price

advantage and organized players account for 45% and EMS Speed Post the

remaining 14%

Warehouses: Warehouses have become key growth drivers in the logistics

industry. Warehousing does not only provide conventional storing services,

but also provides value-added services like consolidation and breaking up of

cargo, packaging, labeling, bar coding and reverse logistics etc.

Warehousing and related activities account for approximately 20% of total

logistics industry and as per KPMG, an additional 120million square feet of

warehousing space is needed in 2012 to meet demand gap in storage space.

Our view is that Warehousing will see a lot of investment in the coming

years

Logistics Parks: About 110 logistics parks spread over approximately 3,500

acres at an estimated cost of $1bn are expected to be operational and an

estimated 45mn sq.ft of warehousing space with an investment of $500mn is

expected to be developed by various logistics suppliers in the coming year.

Majority of these logistics parks are planned in close proximity to state

capitals. However, availability of large land parcels at relatively low cost,

19

connectivity to multiple markets across states and industrial clusters has led

to the emergence of some Tier 2 and Tier 3 cities as favored destinations for

the development of logistics parks and warehouses

To reduce the transportation cost and for quicker movement of cargo,

Multimodal transport operation (MTO) is introduced which helps exporters

with less documentation (for instance single document for all modes of

transport)

Promoter

Mr. V.G. Siddhartha: Entrepreneur

Mr. V.G. Siddhartha is the promoter of the Coffee Day Group. His family has

been in the coffee growing business for more than 130 years. Coffee Day

Group owns 11,000 acres of coffee plantations.

He was the first entrepreneur to set up a cyber cafe in the state of Karnataka, in

1996 (Cafe Coffee Day, a chain of youth hangout coffee parlors). At present,

the Group holds 1400+ Coffee Day Cafes in India.

Coffee Day group is one of India’s fastest growing business conglomerates

with interests ranging from:

o Retail Distribution of Coffee in Various Formats

o IT Technology Parks ( SEZ & STPI )

o Financial Services

o Investments in Technology & Software Companies

o Agri-Businesses

o Commodity Exports

o Luxury Resorts

o Logistics – Port, Rail, Road & Offshore Services

o Furniture Manufacturing

20

Coffee Day Group acquired Sical in September, 2011 and expanded their scope

in logistics business.

Sical Logistics ltd. is India’s leading integrated logistics solution provider for

bulk and containerized cargo. It is the single point for end to end supply chain

needs across businesses.

Coffee Day Group’s vision is to transform Sical into a high performance

organization, with specific focus on delivering value to the customer.

Government Initiative in the Logistic Sector

To emphasis the significance of government initiatives in the logistics

industry and to increase the competence in the sector the government has

introduced private sector participation, especially in the port sector

The major initiative in transport infrastructure is an introduction of National

Maritime Development Program (NMDP) with an investment of Rs 568bn.

NMDP would be addressing the challenges of the growing international

traffic demand of the country along with developing the port facilities at par

with world class standards

In order to liberalize the railway services, the government opened its doors

of container business to private parties

The Government has removed the differential state-level taxes that were

causing higher unit and inventory carrying costs, and introduced uniform

Goods and Services Tax (GST) to reorganize warehousing system in India

FDI Regulations: In general 100% FDI under the automatic route is

permitted for all logistics services

21

SICAL Logistics: Key Challenges

Geographical Coverage Insufficient: Insufficient distribution

channels/infrastructure bottlenecks restrict the scope to reach consumers of

products nationwide

Over-burdened ports: India has a long coastline. However, the country’s port system isn’t utilized properly. 70% of the seaborne trade is managed by 2-3 of its 12 major ports. Remaining 185 minor ports in the country are largely underutilized Warehousing investment is low: The infrastructure including roads, airports and seaports are preliminary the main target areas of investment. However, warehousing, a facilitator for the agricultural sector, has attracted lower investment that reduced its pace of growth in comparison to rising farm output Technology Usage: Technology usage is still very low in India, which restricts the

scope of increasing efficiency and productivity

Cost/Quality of Service: According to industry analysts, logistics costs in India

are among the world’s highest and outside of the metros and a few cities, the

delivery time is very uncertain

Overburdened physical infrastructure is a major bottleneck currently faced by the Indian Logistics and Transportation players

22

SICAL’s Expertise:

Sical is a leading logistics company with a strong presence in the Indian

subcontinent and complete in-house infrastructure. Sical is capable of seamlessly

moving millions of tons to number of locations with zero error. To optimize

control and minimize costs Sical logistics is well designed and is adequately

supported with port, road and rail frameworks.

Leveraging Expertise:

Sical offers its valuable solutions and expertise to wide range of diverse industries

like Steel, Infrastructure, Building & Construction, Shipping, Import & Export,

Chemical and Fertilizer industry. Logistic solutions are custom made to suit

specific client needs.

Dry Bulk:

Sical handles all commodities with caution and care. Movement of heavy dry bulk

requires it to be highly regulated as the commodity is not packed and spillage can

raise environmental concerns. Sical handles the following:

Coal Coke

Limestone

Sulphur

Rock Sulphate

Urea

DAP and MOP

Liquid Bulk

Sical owns a fleet of tank containers for transportation of liquid bulk varying from

petrol to diesel.

Steel Material

23

Inland transportation of steel material like HR coils, CR coils, Slabs, Billets, Pig

Iron, Wires and Plates from source to destination is well coordinated. We also

handle metals like copper anode and aluminum ingots

Ores:

Sical has strong presence at all major and intermediate ports in India. The ports

infrastructure, stevedoring and fleet of trucks equipped with tracking facilities aids

in smooth movement of ores like:

Iron ore

Manganese ore

Chrome ore

Iron ore pellets

Over Dimensional Cargo:

Sical handles safe and secure transportation of over dimensional cargo of varying

sizes and shapes with ease in specially designed vehicles. Plant and machinery,

heavy duty handling equipment, project cargo, transformers and generators are

moved to their destinations without hiccups during transit.

Containerized Cargo:

Sical owned containers are also used in the movement of cargo. Packaged goods

like Fertilizers, Cement, Sugar, and Food items, FMCG, Consumer Electronics,

Tubes and Computers are containerized. Lashing, choking and palletizing are used

to secure the cargo to prevent any damage.

24

Organized Players in Major Logistics Segment

Important Logistics Segment:

Container freight Station: CFS are facilities set-up near the port for handling of in-

transit containers, examination and assessment of cargo by regulatory agencies like

Customs for the Exim trade of the country. They are a critical part of the logistics

chain in relation to the movement of containerized cargo. All the ports (major and

minor) across the country have CFS facility

The total CFS business opportunity in India (Based on FY 11 numbers) is

estimated at Rs. 255 bn and is expected to grow at a CAGR of 12% per annum in

line with the estimated growth in container volumes

25

Third Party Logistics: It includes bundling together of logistics services like

transportation, warehousing, cross docking, Inventory management, packaging and

freight forwarding. The service provider generates margins over the entire logistics

chain which generally ranges between 10-12% (EBIDTA) as compared to~5% in

pure trucking. End to end Logistics outsourcing is likely to be a significant growth

opportunity. The growth in the 3PL market is expected to be in the range of 25-

30% CAGR over FY11-13E. The size of the 3PL industry is estimated ~US$1.5 bn

in FY11 (1% of logistics cost)

Express logistics: The express industry handles two types of consignments, i.e.

documents and non-documents. Documents account for~60% of the total organized

sector revenues while non-documents constitute only 40% of the market. The

remaining 10% is serviced by EMS Speed Post. However, within the domestic

sector, unorganized players offer a price advantage over organized players. As a

result, the organized sector has only a 45% share of the market with unorganized

players having comparable 41% share. The remaining 14% market share lies with

EMS Speed Post

26

PORTER'S FIVE FORCE MODEL OF SICAL LOGISTIC:

Threat of new entrants

No entry barrier in terms of requirement for

licensing needs and industry is vulnerable to easy

scale –up and intense competition

No entry barrier in terms of requirement for

licensing needs and industry is vulnerable to easy

scale –up and intense competition

The industry is highly customer oriented with

multiple vendor options available to customers

Threat of Substitutes

The industry is highly customer oriented with multiple vendor options available to customers

Rivalry

among

competitors:

Lack of

differentiation

in services

leads to

commoditizati

on and further

price erosion

Bargaining power of Suppliers

Government influence on fuel prices makes it

difficult for players to predict, control and pass

through fuel costs to customers

27

MAJOR CLIENT OF SICAL LOG

28

This show that company maintains their client very well it’s 45% of revenue is

collected from single customer and if we see 10 customer of SICAL than its 76%

of revenue is generated from them so company deal in bulk basically. So this

makes company to be different in market from its competitor.

29

Key Ratios

Years Mar-13 Mar-12 Mar-11 Mar-10 Mar-09

Debt-Equity Ratio 0.7 0.6 1.0 2.3 2.9

Long Term Debt-Equity Ratio 0.4 0.2 0.7 2.2 2.7

Current Ratio 1.5 1.3 1.3 1.4 1.7

Fixed Assets 2.3 2.7 2.3 1.7 1.4

Inventory 93.0 106.2 136.6 193.2 106.2

Debtors 4.8 6.4 4.5 3.3 2.7

Interest Cover Ratio 1.1 1.3 1.3 1.7 1.5

PBIDTM (%) 13.6 10.7 5.0 8.5 9.9

PBITM (%) 10.7 8.1 2.9 6.4 7.4

PBDTM (%) 4.2 4.5 2.8 4.9 4.9

CPM (%) 5.8 5.1 4.3 4.9 5.0

APATM (%) 2.8 2.4 2.2 2.7 2.5

ROCE (%) 6.8 5.1 1.9 3.9 3.9

RONW (%) 3.5 3.1 3.3 5.6 5.1

PE 28.4 28.2 26.6 11.9 14.4

EBIDTA 65.8 55.2 25.3 57.5 40.3

Dividend Yield 0.0 0.0 0.0 0.0 0.0

PBV 0.8 0.9 1.1 1.0 0.4

EPS 2.1 2.4 2.7 6.7 1.4

30

RATIO ANALYSIS

SOUTH India Corporation (Agencies) Ltd (SICAL), the MAC group company, has

undertaken a capital restructuring exercise to bring down its debt-equity ratio. At

the same time, the company says it will make supply chain management (SCM) its

core area and think of hiving off divisions that do not hold bright prospects.

From the present debt-equity ratio of 2.1:1, the company hoped to bring it down to

1.5:1, with the interest cover being well above 2. This would be achieved by

bringing in equity partners, hiving off divisions and enhancing promoter’s equity.

The company had retired some high-cost debt and also hoped to access long-term

funds for infrastructure projects.

In order to meet the capital expenditure related to execution of the on-going project

company planned to conserve the amount for the project development so they are

not paying any dividend

31

Years March-

13(1)

Mar-

12(2)

Mar-

11(3)

Mar-10

(4)

Mar-

09(5)

Current Ratio 1.5 1.3 1.3 1.4 1.7

Current assets

Current ratio=

Current liabilities

Company has maintained its current ratio continually (5yrs) it has always been to 1.3 to 1.5

which means co. asset is more than liability but not so much. Basically 2:1 is the ideal current

ratio for any co. so co. has to improve the current assets or decrease the current liability.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

1 2 3 4 5

Current Ratio

Current Ratio

32

Debt-Equity Ratio

Years March-

13(1)

Mar-

12(2)

Mar-

11(3)

Mar-10

(4)

Mar-

09(5)

Debt-Equity Ratio 0.7 0.6 1 2.3 2.9

Outsider’s funds

Debt equity ratio

Shareholder’s funds

It Is calculated to measure the relative claims of outsiders and the owners against the firm’s

assets. This ratio indicates the relationship between the outsider’s funds and the shareholders’

funds.

Ideal ratio: 2:1;

It means for every 2 shares there is 1 debt. If the debt is less than 2 times the equity, it means the

creditors are relatively less and the financial structure is sound. If the debt is more than 2 times

the equity, the state of long term creditors are more and indicate weak financial structure.

0

0.5

1

1.5

2

2.5

3

3.5

1 2 3 4 5

Debt-Equity Ratio

Debt-Equity Ratio

33

Debtor’s turnover ratio

Years March- 13(1) Mar-

12(2)

Mar-

11(3)

Mar-10

(4)

Mar-

09(5)

Debtors turnover ratio 4.8 6.4 4.5 3.3 2.7

In the year ’13 the debtor turnover ratio was 4.8 days which has increased from the year ’09.

Higher debtor turnover ratio is good because higher debtor turnover ratio means, more fastly, we

are collecting money.

Lower debtor turnover ratio is not good because it tells us that we have not managed debtor’s

better ways. Money from debtors is not collected fastly.

Company has increased it debtor turnover ratio compared to last 5 years but it has fallen in ’13

due to high competition so company need to do some innovative to regain it debtors.

0

1

2

3

4

5

6

7

1 2 3 4 5

Debtors turnover ratio

Debtors

34

Fixed Assets

Years March-

13(1)

Mar-

12(2)

Mar-

11(3)

Mar-10

(4)

Mar-

09(5)

Fixed Assets 2.3 2.7 2.3 1.7 1.4

Years March- 13(1) Mar-12(2) Mar-11(3) Mar-10

(4)

Mar-09(5)

Interest Cover Ratio 1.1 1.3 1.3 1.7 1.5

0

0.5

1

1.5

2

2.5

3

1 2 3 4 5

Fixed Assets

Fixed Assets

0

0.5

1

1.5

2

1 2 3 4 5

Interest Cover Ratio

Interest Cover Ratio

35

PE RATIO

Years March- 13(1) Mar-12(2) Mar-11(3) Mar-10

(4)

Mar-09(5)

PE 28.4 28.2 26.6 11.9 14.4

Years March-

13(1)

Mar-

12(2)

Mar-

11(3)

Mar-10

(4)

Mar-

09(5)

Long Term Debt-Equity Ratio 0.4 0.2 0.7 2.2 2.7

0

10

20

30

1 2 3 4 5

PE

PE

0

0.5

1

1.5

2

2.5

3

1 2 3 4 5

Long Term Debt-Equity Ratio

Long Term Debt-Equity Ratio

36

37

38

39

40

COMPETITOR

Name Last Price Market Cap. (Rs. cr.)

Sales Turnover Net Profit Total Assets

Adani Enterpris 324.05 35,639.35 11,890.88 519.83 15,295.21

MMTC Ltd 54.25 5,425.00 28,598.36 -70.62 2,819.06

PTC India 61.95 1,833.77 8,856.87 128.74 2,325.68

Swan Energy 62.25 1,376.85 277.31 19.76 337.15

STC India 176.65 1,059.90 19,275.49 17.95 2,712.30

Ind Motor Parts 410 341.1 495.42 27.2 173.8

Sical Logistics 56.35 313.32 500.05 11.72 718.24

Jindal Worldwid 97.2 194.91 605.97 13.53 260.84

UB Holdings 25 167.05 533.58 -166.96 4,318.88

Uniphos Ent 20.05 139.44 1.11 -10.18 281.15

Sicagen India 13.2 52.23 884.18 13.3 508.01

Kothari Petro 8 47.08 238.01 5.21 70.63

Surana Corp 17.6 42.87 8,471.25 53.16 1,113.83

V2 Retail 16.95 37.97 105.67 -5.27 292.42

Sakuma Exports 17.2 28.25 618.83 4.19 122.57

Farmax India 0.4 16.33 51.92 -127.32 128.72

Khaitan 20 9.5 25.44 -1.88 96.1

JIK Industries 0.9 6.54 8.43 -5.38 109.07

41

KE (COST OF EQUITY)

Ke=Rf+Beta*(Rm-

Rf)

Rm -0.14209

Beta -0.0163

Rf 0.08

Ke 0.083621 8.00%

Benchmark 14%

Since the bench mark for ke is 14% but companies ke is approx. 8%

so we should not invest now in this company. When ke will rise in

future than we should invest in this company. Since this SICAL is

coming up with lots of new projects than we can think for investing

in this particular company.

RRE

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

2004-08 2005-09 2006-10 2007-11 2008-12 2009-13

GDP

RRE%

42

Year

2013 2012 2011 2010 2009 2008 2007 2006 2005 2004

PAT(Rs. In Cr.) 11.72 13.29 13.01 15.5 13.56 20.79 21.71 65.1 34 9.66

Dividend 0 0 0 0 0 0 0 0 0 0

RE 11.72 13.29 13.01 15.5 13.56 20.79 21.71 65.1 34 9.66

5 Yr Moving Total

2004-08 2005-09 2006-10 2007-11 2008-12 2009-13

151.26 155.16 136.66 84.57 76.15 67.08

RRE

-0.02743 -0.09849 -0.10287 -0.36294 -0.13173 0.073582

RRE%

-2.74299 -9.84898 -10.2873 -36.2945 -13.1735 7.358191

Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

GDP Rate 8.1 7 9.5 9.6 9.3 6.7 8.6 9.3 6.2 5

5 yr moving Total 43.5 42.1 43.7 43.5 40.1 35.8

2004-08 2005-09 2006-10 2007-11 2008-12 2009-13

GDP 8.7 8.42 8.74 8.7 8.02 7.16

RRE% -2.74299 -9.84898 -10.2873 -36.2945 -13.1735 7.358191

From the above graph we can see that RRE of SICAL logistic is not dependent on

the GDP. From the year 2004 to 2010 it was dependent on some factor but after

that it became independent even though GDP was not fluctuating so much RRE of

SICAL fell but after few year it gained back.

43

SICAL STOCK PRICE VARIATION IN 1 YEAR

SICAL’S STOCK PRICE COMPARISION WITH ITS COMPETITOR

44

SICAL Logistics Stock Analysis

Current Stock

Price Market Cap My Views

Rs.56.1 Rs. 312 Crores Looks fairly valued limited signified upside from

current levels.

Sical Logistics Ltd has multiple business segments within the Logistics sector including

Stevedoring (Port Handling) operations in various ports in South India,

Road Logistics by transporting cargoes thru Trucks by Road. The company owns 249

trucks and hires additional trucks on need based

Travel Agency - Rail and Air ticketing, Hotel booking and tour packages

Shipping and Customs House Agency

Apart from this, thru its subsidiaries (And step down subsidiaries) the company is engaged in

Container Freight Stations (CFS) in Chennai and Tuticorin. It owns Railway Rakes which runs

on Pan India basis. Sical Logistics has also completed a 6 Million Iron Ore terminal at Ennore

Port on BOT (Built-Operate-Transfer) basis and is ready for operation. But due to ban on export

of Iron Ore from Karnataka, this terminal is not operational currently. Sical Logistics handles

cargo for TNEB's Power Plants and has also bagged a contract from Neyveli Lignite Corporation

Ltd for transporting coal thru rail-sea route for their power plant at Tuticorin.

Financials (Rs. In Crores Except Ratios)

Historical Stock

Performance

Year Revenues PAT EPS EBITD

A Dividend DEBT Equity

Debt

to

Equity

Low

Price

Rs.

High

Price

Rs

Low

PE

High

PE

2009 479.61 5.4627 1.2 41.7671 0 749.94 196.118 3.82 19.65 205.75 16.38 171.46

2010 537.4 26.3645 5.92 44.2658 0 469.188 327.195 1.43 21.85 101.95 3.69 17.22

2011 570.475 10.7578 2.54 27.5599 0 334.008 389.074 0.86 61.9 100.7 24.37 39.65

2012 507.871 13.2875 2.39 55.1724 0 205.255 402.68 0.51 67.1 80.5 28.08 33.68

2013 513.208 11.7182 2.11 69.3268 0 301.292 416.943 0.72 60 73.8 28.44 34.98

Though the projects and business all looks promising, still there has not been significant

improvement in their profits due to interest costs eating into the profits. There have been no

dividends so far, debt to equity has been average and flat to decline in revenues due to certain

restrictions on port activities and slowdown in trade. In light of that at current market

capitalization of Rs 312 crores, it looks richly valued for the financials it has posted so far. Even

the consolidated figures’ including its subsidiaries doesn’t look impressive. The future prospects

45

based on current capacity of the company also appears to be in line with its past performance.

In light of the above facts, I feel the stock is fairly valued limited any significant upside from

current levels. Hence I would avoid this stock at current levels. The company prospects and its

market valuation makes the stock little attractive currently. Some of the best managed logistics

company and which can considered as better alternates to Sical Logistics include Gateway

Distriparks and Container Corporation of India . But even they are not available at great bargain.

Credit Risk Assessment:

Long track record and integrated nature of logistics operations Sical has been in the logistics

business for more than five decades and operates in almost all the major ports in the country. The

company has three business divisions namely Port handling division, Trucking division, and

Customs House Agency. Port handling division is the major contributor (69% of total income in

FY12) and the primary activity includes loading and unloading cargo to/from vessels at the ports.

Major cargo handled by this division is coal, in addition to iron ore and dolomite. Sical has a

Berth Reservation Scheme (BRS) agreement (valid till Feb 2018) for JD 5 dock with Chennai

Port Trust and has exclusive rights for handling the vessels at this berth. On a consolidated level

Sical along with its subsidiaries operates in related line of business including Rail Logistics

(SMART-Sical Multimodal and Rail Transport), Container Freight Stations (SDL-Sical

Distriparks Ltd), and Container terminal operation (PSA Sical) which enables the company to

provide integrated logistics solution at the consolidated level. SDL operates container freight

stations at Chennai, Vizag and Tuticorin. SMART is primarily into rail operations and operates

rake across India.

Stable revenue aided by the long term contract from TNEB

Sical has long-term agreement (up to Feb 2022) with Tamil Nadu Electricity Board (TNEB),

whereby it had setup a mechanized coal handling facility at Ennore Port under BOT (Build-

Operate-Transfer) model. TNEB has guaranteed minimum cargo of 6 million tonnes of coal per

annum which ensures a stable stream of revenue to the company. In addition, the company also

handles coal for TNEB at Chennai and Tuticorin Port. TNEB is a major client for Sical

contributing to a significant share of its total income. During FY12, Sical generated around 44%

of its total income from TNEB as against 32% of total income in FY11.

Limited competition in stevedoring operations and highly competitive nature of trucking

Business:

Coal handling requires effective port operations, liasoning with various authorities and good

understanding of costs which imparts high entry barriers to this business and results in only a

limited number of players being present in this segment. Trucking division is generally highly

46

competitive. The industry faces stiff competition from both organized and un-organized sector.

Sical has built its expertise in handling liquid cargo and also derives revenue from handling bulk

cargo, engineering goods, project cargo etc. The company operates largely on an annual contract

basis with its customers and derives majority of its income from South India.

Significant exposure to subsidiary/group companies

Sical had significant exposure of Rs.412 cr as on March 31, 2012 to its subsidiaries by way of

investments and loans & advances. The major exposures were with Sical Infra Assets Ltd

(Rs.112 crore as on March 31, 2012) which holding company for SMART & SDL, Sical iron ore

terminal Ltd (Rs.118 crore) and Bergen offshore logistics (Rs.112 crore) which is engaged in

dredging activity.

Overall the exposure to subsidiaries in the form of loans and advances has increased to Rs.412

crore as on March 31, 2012 as against Rs.361 crore as on March 31, 2011 primarily due to

financial support extended to Sical Iron Ore Terminal Ltd (SIOT) for servicing its interest

payments and increase in investments in Sical Iron Ore (Mangalore) Terminal Ltd.

Though the performance of few its subsidiaries have improved in FY12, the subsidiaries in

which Sical has major exposure are yet to generate any returns. On a consolidated basis, the

company reported a PAT of Rs.16crore (net loss of Rs.11 cr in FY11) on a total income of

Rs.787 crore. The improvement was aided by the improvement in performance of some of the

subsidiaries including Sical Distriparks Ltd and Ennore Automotive Logistics Ltd.

In addition to the investments and loans & advances, Sical has also extended support to its

subsidiary/group companies by way of corporate guarantees for the loans availed by these

companies. As on March 31, 2012, the corporate guarantees extended to subsidiary/group

companies amount to Rs.468.62 cr, of which SIOT forms the major share at Rs.350 cr as on the

same date.

Delay in operationalization of Sical Iron Ore Terminals Ltd (SIOT)

SIOT was established for the purpose of setting up Iron Ore Handling Terminal at Ennore Port.

Though the terminal was commissioned in November 2010, it is yet to start commercial

operation due to ban on iron ore mining and exports by Government of Karnataka. In view of

above, SIOT has got extension of Commercial Operations Date (COD) for 2 years i.e till August

2014. Even though the approval for extension of COD has been obtained, the company has not

approached for revision of repayment terms in respect of SIOT’s term loans from its bankers. As

the SIOT facility is not generating cash flows, Sical has been supporting SIOT’s debt servicing

by way of loans and advances.

Even though SIOT expects to convert the Iron Ore Terminal to Multi-purpose cargo terminal and

start commercial operations, servicing of debt obligations by SIOT on its own is likely to take

47

time. Going forward, the continued servicing of interest and principal instalments of SIOT is

likely to be a strain on the financial risk profile of Sical.

Demonstrated support of promoter

The ‘Coffee day group’ has been extending assistance to Sical by way of equity infusion.

In April 2011, the company has redeemed FCCBs with a maturity value of USD 50.16 million

(Rs.226 cr). The redemption of FCCB’s were partly funded through equity infusion of Rs.122

crore , financial assistance from promoter in the form of unsecured loan amounting Rs.67 crore

which was subsequently replaced by term loan during FY12. Going forward, continuation of

need based support from the promoter group would remain a key rating sensitivity.

Prospects

With stable revenue from long-term contracts, established business operations and stable profit

margin, the financial position of Sical is likely to remain stable. Further, new businesses such as

handling logistics activity for Coffeeday group, dredging activity and recently secured ‘end-to-

end’ coal handling contract of NLC Tamil Nadu Power Ltd provides revenue visibility to Sical in

the long term. At the same time, though Sical’s subsidiaries are in related line of businesses and

synergies of integrated operations imparts strength to the group as a whole, significant exposure

to group companies by way of investments and corporate guarantees continue to be a key

concern.

SICAL”S project and plan in future

The process of downsizing was on and the employee strength had come down from

3,500 a year ago to about 2,700 now. They are further planning to reduce to 2,200

in a year. The number of working directors had also come down to three from

seven. These measures had resulted in saving of about Rs. 6 crores annually.

Apart from SCM, the company had identified marketing, sugar and distillery

divisions as areas of growth. The company planned to have a 22 MW co-

generation facility for the sugar division. The company would dispose of

businesses where it felt growth prospects were not good.

SICAL’S target is to be positioned as one of India's largest SCM companies using

the port as an important gateway. It would even offer to source certain

commodities for its customers to offer them a complete chain - from sourcing to

48

deliver the product at the door-step. The company will be introducing a software

tool that would help its clients track the movement of the cargo on-line and also

resolve SCM problems.

SICAL had formed a 50:50 joint venture with Coeclerici Logistic of Italy to form a

company called SICAL Coeclerici Logistics Ltd. The Italian company had a large

presence in the Capesize and Panamax sized vessel markets and specialized in

offshore logistic while SICAL's expertise would be in offering on-shore handling

facilities.

Joint venture will bring out of the need to offer low-cost logistics options to the

large number of mega projects that were under way. The new company would

handle the coal movement for SPIC's power project coming up at Tuticorin. It is

also holding discussions with a couple of other power projects on the West Coast.

Mitsuba Corporation of Japan, which was a collaborator for the auto component

business, was interested in taking an equity stake and SICAL was holding

discussions on how much equity to offer to it.

Samsung is going to supply cranes for the contract that SICAL has bagged to

handle coal for the Tamil Nadu electricity board the Ennore Port. It would be

investing about Rs. 80 crores in this facility and another Rs. 15 crore s at the

Jawahar Dock - 5 in Chennai Port. About Rs. 20 crores of the proposed investment

would come in through equity, some funds through the sale of assets and the

balance through debt. On Pearl Ships, financial institutions had been approached to

reschedule the loan.

Achievements:

More than 26 million tons of cargo handled per annum

Highest tonnage of 23200 MT of Limestone handled in a single day at

Chennai Port

Highest loading of 36015 MT of Iron ore in a single day at Visakhapatnam

Port

Highest Coal discharge of 34,078 MT in a single day at Mangalore Port

More than 6 Lakh TEUs (Containers) handled per annum

Own equipments deployed at various ports increasing our efficiency

49

Experience in providing end to end logistics services for over 5 decades

Market leader in container freight station for consecutive 5 years in South

India

Awards

Sical won Tamil Chamber of Commerce EXIM achievement award for

"Stevedore of the Year 2011-2012"

South East Conclave award for “Best CFS of the year” 2012

Sical won “Stevedore of the year 2011 – 2012” award from Ennore Port

Limited

Chamber of Commerce EXIM achievement award for Best Stevedore - 2011

Chamber of Commerce EXIM achievement award for Best CFS - 2011

South East Conclave awards for Best Logistics Company of the year - 2010

Express Logistics & Supply Chain Conclave awards for Best Container

Logistics Service Provider- 2008 and Best Bulk Logistics

50

CONCLUSION