Business Logistics & SCM

Get to Know about Logistics and the Industry

Logistics sector has hidden potential May 4, 2007

Filed under: Business Logistics — TSBL @ 3:57 am

Sical aims at being an integrated multi-modal logistics service provider to handle bulk cargo. The company has initiated hiving off its non-core businesses.

The containerization of cargo is 25% globally whereas India stands at 5%. This can lead to a growth in container industry by over 14% annually.

Speaking at the IRIS India Equity Show, Ram Kumar, Managing Director said the logistics sector was hidden in India. He said new technologies like RFID and GPS have great potential provided the industry has the willingness to pay. The importance has grown with the increase in the volumes and global competition has reduced prices with increased levels of efficiency in logistics.

The Indian Logistics industry is guesstimated at Rs 90 billion of which 70% belongs to the unorganized sector. The industry is estimated to grow in road segment by 13%, port segment by 9.5% and rail segment by 6%. This will be possible with the implementation of the Golden Quadrilateral programme, National Maritime programme, introduction of freight corridors in rails and implementation of VAT.

On the revenue front, 65% of the company`s revenue comes from port handling of which 80% comes from the power sector for supply of coal. The importance of logistics costs was affirmed with the MD citing the example of delivering iron ore to China. There is generally a 2000% increase in costs due to transportation.

The company desires to increase its brand equity in the likes of other companies by leveraging its niche i.e. bulk commodities cargo. The company desires to participate in the GOI`s Railway Freight Corridor. However, the company awaits a guideline on that front.

Sical is the largest distributor of Tata tubes. The company`s new projects are an Iron Ore terminal at Ennore and a container rail terminal project at Nagpur that would entail an investment of Rs 60-80 crore. The capital outlay for iron 0re amounts to Rs 5.5 billion which is expected to give a 16% IRR.

Article Dated: 1- Sep, 2006



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