market research report : logistics services market in india 2013

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Logistics Services Market – India

February 2013

2

SAMPLE

Executive Summary

Market

Competition

Major Players

Player A Player B Player C

Player D Player E Player F

Player G Player H Player I

Drivers & Challenges

Drivers Challenges

TechnologyAdoption

LOGISTICS SERVICES MARKET IN INDIA 2013.PPT

• Share of Logistics Services in Total Logistics Market in India was estimated to be c1% in 2011 and is expected to

reach c6% in 2016

• Logistics services accounts for around c% of the total logistics market

• Courier, Freight Forwarding, 3PL and Reverse Logistics exhibits significant market potential in India

– Global Trade Boom– Rapid Economic Growth & FDI in Logistics – Growth in Retail Sector– Rise in e‐Tailing – Increased demand for Consumer Electronics and Durables– Expansion of Auto & Auto Components Sector

– Poor Infrastructure

– Lack of Skilled Manpower

– Warehouse Space Deficit

Identification Technology – Barcode, RFID

Material Handling Technology ‐ Automated

Guided Vehicle System (AGVS) , Information

directed System

Technology Adoption by Leading Players

Enterprise Application – ERP, eBizNET –SC suite, Vin eRetail

Communication Technology ‐ Global Positioning System (GPS) Tracking

Software Solution Providing Companies

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SAMPLE


•Introduction•Evolution•Market Overview •Advantages of Services•Segments & Features•Distribution Channel•Role of Regulatory Bodies•Drivers & Challenges•Key Issues•Technology Adoption •Competitive Landscape•Transactions•Strategic Recommendations•Appendix

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SAMPLE

Logistics sector primarily deals in transportation and storage operations and is significantly aided by logistics services

Logistics services also include import/export management, customs clearance, clearance, freight forwarding, customer service, rate negotiation, order processing, assembly/installation, distribution, order fulfillment, reverse logistics,

consulting services that include distribution network planning, site selection for facility location, fleet management, freight consolidation and logistics audit amongst others

TRANSPORTATION

Container Rail Transport

STORAGE

Road Transport

Express Logistics

Coastal Shipping

Air Cargo

Project Logistics

Warehousing

Logistics Park

Inland Container Depot

Container Freight Station

Port

Courier Service

Freight Forwarding

3PL/ 4PL

LOGISTICS SECTOR

LOGISTIC SERVICES

Cold Chain

Reverse Logistics


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SAMPLE

A Courier is a person or company that is engaged in transporting, dispatching and delivering messages, packages and mail at some extra cost

Logistics Services ‐ Segmentation

Logistics services has significant business earning potential in business services that require courier; movement of heavy commodities that require freight forwarding, outsourcing of logistics activities by business houses as well as logistics companies

that boosts 3PL and returns processing that involve key sectors that has built a favorable position for reverse logistics

Courier Service

Services of any kind relating to the carriage, consolidation, storage, handling, packing or distribution of the goods with ancillary and advisory services in connection therewith, including but not limited to customs and fiscal matters, declaring the goods for official purposes, procuring insurance of the goods and collecting or procuring payment or documents relating to the goods

Freight Forwarding

Third Party Logistics (3PL) involves outsourcing activities related to logistics and distribution

3PL industry includes Logistics Solution Providers (LSPs) and shippers whose business processes they support.

Third Party Logistics (3PL)

Process of planning, implementing, and controlling efficient and cost effective flow of raw materials, in‐process inventory, finished goods and related information, from point of consumption to point of origin, for purpose of recapturing value of proper disposal

Reverse Logistics

Courier Service Freight Forwarding 3PL Reverse Logistics Key


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Evolution of Courier Services


Indian Postal System came into existence

Introduction of India Post Office

Act

Organized Courier came into existence

Courier industry started gaining momentum

1774

1837

1977

1980s

SAMPLE

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SAMPLE

The logistics market is growing at a CAGR of X% of which c% is comprised by Services segment

Logistics Market – Segmentation

c%

b%

a%

CBA

Share of Logistics Services in Total Logistics Market in India

20‐‐ 20‐‐ 20‐‐e 20‐‐e 20‐‐e

INR units

25

20

15

10

5

0

X%

20‐‐e

X6

20‐‐e

X5

20‐‐e

X4

20‐‐e

X3

20‐‐

X2

20‐‐

X1

Logistics Market Size and Growth

20‐‐e


8

SAMPLE

Growing business opportunities in India is driving the need for time bound service Market Overview – India Courier Market Size and Growth – India •The courier/ express courier market is highly fragmented with numerous small unorganized players

• The market was valued at INR a units in 20‐‐ and is expected to reach ~INR f units in FY 20‐‐

•The market is estimated to maintain a steady growth rate of around A% between 20‐‐ to 20‐‐

•With over a lakh of pin codes in India, only around 10,000 are connected by courier service It thus makes the lesser known players very significant in the market as they take upon the responsibility of providing last mile service for large organized players

0

100

200

300

400

a

INR units

A%

20‐‐e

f

20‐‐e

e

20‐‐e

d

20‐‐e

c

20‐‐

b

20‐‐

o%

n% m%

ONM

Revenue Split of Courier Sector Express/ Courier Categories in India

Government Administered

India Post

Global Integrators UPS, FedEx, TNT and DHLGlobal Integrators

Blue Dart, DTDC, First Flight etc.Large Indian Companies

Other Small Courier Companies

Regional Players


9

SAMPLE

Freight forwarders’ exhaustive understanding of transport business ensures cost effectiveness for its clients

Factors Favoring Freight Forwarder

• Control of the end‐user customer as asset operating air and container carriers increasingly rely on forwarders wholesaling capacity

• Ability to provide better supply chain information to customers

• Flexibility of services across different carriers and modes of transportation

• Ability to attract and retain high quality clients due to higher growth and profitability

Freight Forwarder

• Forwarders offer flexibility with customers

• Able to customize their services to specific requirements because they do not need to fill planes or ships each day

• Freight Forwarders have competitive advantage on the human resources front

• Many forwarders reward employees based on area level profitability, attracting more quality people to freight forwarding

• Better understanding of cost and effectiveness of transportation business

• Forwarders are far less complex because they focus on the basic factors such as sales, terminal operations, procurement of transport services etc


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SAMPLE 3PL Providers – Types Based on their Functions

Types of 3PL Providers

Based on Transportation Based on Warehouse/Distribution Based on Forwarder

• Services extend beyond transportation to offer a comprehensive set of logistics offerings

• Leveraged 3PL service providers use assets of other firms

• Non‐leveraged 3PLs use assets belonging solely to the parent firm

• Examples: Ryder, Schneider Logistics, FedEx Logistics, UPS Logistics

• Many have former warehouse and/or distribution experience

• Examples: DSC Logistics, USCO, Exel, Caterpillar Logistics, IBM

• Very independent middlemen with forwarder roles

• Non‐asset owners that provide a wide range of logistics services

• Examples: AEI, Kuehne & Nagle, Fritz, Circle, C. H. Robinson, Hub Group

Based on Financial Issues Based on Information

• Provide freight payment and auditing, cost accounting and control, and tools for monitoring, booking, tracking, tracing, and managing inventory

• Examples: Cass Information Systems, CTC, GE Information Services, FleetBoston

• Significant growth and development in this category of Internet‐based, business‐to‐business, electronic markets for transportation and logistics services

• Examples: Transplace, Nistevo


11

SAMPLE

Supplier ManufacturerThird

Party Logistics Provider

Third Party Logistics

Provider

Retailer/ Buyers

Logistics Services

Transaction Transaction

Logistics Services

3PL – Distribution Channel


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SAMPLE

Role of Government: Summary

Ensuring Competitiveness

India Post Office Amendment Bill

Foreign DirectInvestment

Infrastructure DevelopmentLawsRole of

Government


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Drivers ‐ Summary

Common Drivers Key Impact

Global Trade Boom

Rapid Economic Growth & FDI in Logistics

Growth in Retail Sector

Rise in e‐Tailing

Increased demand for Consumer Electronics and Durables

Expansion of Auto & Auto Components Sector

Financial Institutions Dependence on Courier

Growing Business of Private Telecom Sector

Seasonal Business Upsurge Due to Occasions

Diversification into Logistics Business

Improved Transportation Infrastructure

Rising Competitiveness among Domestic Companies

High cost of Logistics in India

Phased implementation of VAT

Government Infrastructure Initiatives

Government Concern for Sustainability

Garnering Customer Satisfaction

Growing Consumerism among Indians

Economic Viability of Reusing Goods

Growth of PharmaMarket

CourierReverse Logistics

Freight Forwarding

3PL


SAMPLE

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SAMPLE Reverse logistics is plagued by mismanaged returns, high distribution cost and retailer‐manufacturer conflicts

Key Issues

• Retail outlets and showrooms are often not systematic enough in smoothly segregating the articles to be sent to manufacturers that leads to loss of time for reverse logistics service providers

Mismanagement in Segregating

Returns

High Distribution Costs

• Transportation, warehousing, distribution and inventory management are the major cost components of reverse logistics

• If companies find that total costs associated with reclamationefforts exceed total costs of new materials or products, firms would have no financial incentive for implementing a reverse logistics system

• So it becomes very important for logistics service providers to provide services at competitive rates

Retailer‐Manufacturer

Conflict

• Conflicts arise between retailers and manufacturers due to reasons involved in product recall

• Retailers perceive that every product damages happen in the process of logistics or in the production process, so every product demands full compensation

• Manufacturers, on the other hand, perceive that recalled products may be damaged by retailers, so every recalled product should not be given full compensation

• The above factors result in confusion of reverse logistics process initiation


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SAMPLE

3PL is witnessing better productivity with rising investments in A, B, C & new supply chain tools

• Communication plays a key role in logistics business

• Ensures speed and accuracy in customer service

• Helps in bringing in competitiveness among service providers

• IT implementation comprises mainly ZZ packages

• A is one of the most popular IT tool being used across logistics

• Loading, unloading and storage of goods in warehouses

• Reduces need of labor force• Automated material handling becomes useful in areas of hazardous goods

• Direct data entry into computer

• Technologies x, Y, Z, magnetic strip and A are used

• Used for tracking rail cars and carton movement

Enterprise

App

lications

CommunicationTechnology

CompetitiveAdvantage

Material

Han

dling

IdentificationTechnology


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SAMPLE

Key People

Products and Services

Company Information Offices and Centres – India

Corporate Address

Player A

5th Road, 6th Street,

City A – 700 xxx

Tel No. 91 22 6679 xxxx

Fax No. 91 22 6679 xxxx

Website www.playera.com

Year of Incorporation 19‐‐

Ticker Symbol 53xxxx (BSE)

Stock Exchange Bombay Stock Exchange

Name Designation

Person A MD

Person B CFO

Person C CEO

Head Office

Public: Domestic Company – Player A (1/3)

City X

Category Products/Services


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SAMPLE Financial Snapshot Key Ratios

Financial Summary

• The company earned a net profit of INR 2,345.9 mn in FY 2012, ascompared to net profit of INR 2,228.7 mn in FY 2011

• The company reported total income of INR 35,858.4 mn in FY 2012, registering an increase of 4.3% over FY 2011

• The company earned an operating margin of 8.78% in FY 2012, a decrease of 0.19 percentage points over FY 2011

• The company reported debt to equity ratio of 0.86 in FY 2012, a decrease of 1.63% over FY 2011

Key Financial Performance Indicators

Indicators Value (09/01/2013)Market Capitalization (INR mn) xx

Total Enterprise Value (INR mn) xx

EPS (INR) xx

PE Ratio (Absolute) xx

Improved Decline

Net Profit/LossTotal Income

35,858.434,381.028,803.1

20,836.4

0

10,000

20,000

30,000

40,000

0

1000

2000

3000

INR mnINR mn

2012201120102009

Public: Domestic Company ‐ Player A (2/3)

Particulars y‐o‐y change (2012‐11)

2012 2011 2010 2009

Profitability RatiosOperating Margin ‐0.19 8.78% 8.97% 7.61% 8.01%

Net Margin 0.06 6.54% 6.48% 5.76% 6.24%

Profit Before Tax Margin ‐0.15 8.44% 8.58% 7.77% 8.13%

Return on Equity 0.48 15.42% 14.94% 13.74% 13.07%

Return on Capital Employed 1.52 14.71% 13.18% 13.53% 13.95%

Return on Working Capital ‐11023.91‐

10973.56%50.35% 46.22% 36.95%

Return on Assets 0.32 8.27% 7.95% 8.07% 8.62%

Return on Fixed Assets 4.55 16.76% 12.20% 19.68% 23.75%

Cost RatiosOperating costs (% of Sales) 0.19 91.11% 90.92% 92.34% 91.90%

Administration costs (% of Sales)

17.24 17.24% 0.00% 6.07% 8.64%

Interest costs (% of Sales) 0.03 1.65% 1.62% 0.68% 1.12%

Liquidity RatiosCurrent Ratio ‐48.94% 1.00 1.95 1.82 2.13

Cash Ratio ‐43.37% 0.26 0.47 0.63 0.83

Leverage RatiosDebt to Equity Ratio ‐1.63% 0.86 0.88 0.70 0.52

Debt to Capital Ratio ‐20.15% 0.27 0.34 0.24 0.17

Interest Coverage Ratio ‐3.90% 5.39 5.61 11.27 7.20

Efficiency RatiosFixed Asset Turnover 35.97% 2.53 1.86 3.39 3.77

Asset Turnover 3.01% 1.25 1.21 1.39 1.37

Current Asset Turnover 36.26% 5.10 3.74 3.59 3.11

Working Capital Turnover ‐21677.73% ‐1655.74 7.67 7.97 5.86

Capital Employed Turnover 2.23% 2.33 2.28 2.37 2.07


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SAMPLE

Key Business Segments Key Geographic Segments

Business Highlights

Description News

Overview

Recent Transactions

Reverse Logistics

0%

50%

100%

20‐‐

A

0%

50%

100%

20‐‐

B

XX

Public: Domestic Company – Player A (3/3)


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Appendix

Ratio Calculations

Operating Margin (Operating Income/Revenues)*100

Net Margin (Net Profit / Revenues) *100

Profit Before Tax Margin (Income Before Tax / Revenues *100

Return on Equity (ROE) (Net Income / Shareholders Equity)*100

Return on Capital (ROCE) EBIT / (Total Assets – Current Liabilities)*100

Return on Working Capital (EBIT / Working Capital) *100

Return on Assets (EBIT / Total Assets)*100

Return on Fixed Assets (EBIT / Fixed Assets) *100

Operating Costs (% of Sales) (Operating Expenses / Sales) *100

Administration Costs (% of Sales)

(Administrative Expenses / Sales) *100

Interest Costs (% of Sales) (Interest Expenses / Sales) *100

Ratio Calculations

Current RatioCurrent Assets / Current Liabilities

Cash Ratio{(Cash & Bank Balance + Marketable Securities) / Current Liabilities)}

Debt to Equity Total Liabilities / Shareholders Equity

Debt to Capital Ratio{Total Debt / (Shareholders Equity + Total Debt)}

Interest Coverage Ratio EBIT / Interest Expense

Fixed Asset Turnover Sales / Fixed Assets

Asset Turnover Sales / Total Assets

Current Asset Turnover Sales / Current Assets

Working Capital Turnover Sales / Working Capital

Capital Employed Turnover Sales / (Shareholders Equity + Total Debt)

SAMPLE


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