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Draft For Discussion | Private & Confidential

Your Partners in Growth

Logistics Sector Report – 2015

Executive Summary

1 Draft For Discussion | Private & Confidential



Click to edit Master title style Contents

SECTIONS Page Numbers

1 Executive Summary 3

2 Sector overview

Global Logistics Industry 15

Indian Logistics Industry 23

3 Sub Industry

3a Transportation 31

Road Transport 33

Rail Transport 36

Ocean / Sea Freight 39

Air Freight 43

Express Delivery 47

3b Warehousing 50

Industrial Warehousing 54

Liquid Storage 56

Agri Warehousing 58

Cold Chain 63

CFS / ICD 67

3c Services 69

3PL Logistics 70

E – Commerce Logistics 72

Reverse Logistics 74

4 Key Players 75

Logistics Segments covered 76

Industry Sectors serviced 80

Financials 83

5 M&A/ PE deals in Logistics 86

7 Due-Diligence Considerations in Logistics Sector 99

8 Mergers Alliance Team 104

2



Executive Summary

3



Executive Summary

INDIAN LOGISTICS SECTOR

Indian logistics industry size is ~ USD 166 billion which includes transportation, warehousing & services and has grown at a CAGR of over 16 per cent over the last five years

Industry is highly fragmented with organized players consisting of only

6% of the industry

Post GST, re-organization in countrywide logistics sector will decrease cost of primary freight since warehousing locations are likely to be placed closer to manufacturing/import/export locations. In contrast, this would increase secondary freight due to fewer warehouses

The cold storage industry is expected to grow at ~15% per annum on a sustained basis over the next 5 years, with the organized market growing at a faster pace of ~20%

Cold chain industry users:

Thus a strong cold storage network is required to support rapid growth

of industry users and thus avoid the losses

Matrix of logistics sectors is changing due to focus on 3PL, E-Commerce logistics, Express Logistics

E-Commerce industry is growing at 35-40% CAGR. Strong E-Commerce logistics is required to support rapidly growing E-Commerce

Large players are introducing a dedicated E-Commerce logistics business. E.g. Gati Ltd introduced dedicated E-Commerce Logistics unit

Govt. focus on infrastructure. E.g. golden quadrilateral, east-west and north-south corridors. Tax break for foreign investors in cold-storage, agri-warehouse and FTWZ. Govt. has allowed 100% FDI in almost all logistics sub-segment

Impact of GST on Logistics Sector

Industries requiring Cold Chain % Growth

Indian Food Processing Industry 17%

Quick Service Restaurants (QSR) 30%

Pharma 23% - 30%

Flower segment 25%

Spices (demand) 21%

Large logistics companies have increased their margins by enhancing the value of service offering as well as increasing the entry barrier by technology and branding

Companies started out as road operators providing simple door-to-door services have added complex contract logistics/distribution services

Eliminate existing inter state sales penalties

Reduction in no. of warehouses

Improved efficiencies Better control and

reduction in inventory

Advantage of Economies of scale

Reduced capital deployed in business

Facilitate consolidation of warehouses, vendors, suppliers

Larger warehouses results in state-of-art planning and systems

IT cost of having ERPs deployed at small warehouses can be saved

Transportation lot size increase and results in bigger trucks

New distribution model : Hub and Spoke model

Removal of C&F distributors

4



Click to edit Master title style Structure of Logistics Sector

Transportation

Business Activities

Market Size (As on 2012)

CAGR (2012-2017)

Process of transporting commodities, merchandise goods, cargo Road Rail Air Water (Ports) Express Delivery

Process of storing of goods within the storage facility Industrial Agri Cold Storage CFS/ICD FTWZ

Process of outsourcing to logistics providers that manages all or significant part of an organizations logistics requirements 3PL 4PL E-Commerce Logistics

Global: USD 2124 BN

India: USD 140 BN

Global: USD 535.36 BN

India: USD 9.33 BN

Global: USD 840.63 BN

India: USD 17.4 BN

Global: 3%

India: ~7%

Global: 5.8%

India: ~10%

Global: 6%

India: 21.16%

Sical BoxTrans (J. M. Baxi) Gateway Distripark CONCOR Blue Dart TVS Logistics Fourcee Infrastructure Equipment Arshiya International OM Logistics

AllCargo NDR Group - Continental Warehousing Aegis Logistics Kesar Terminal Ruchi Infrastructure Snowman Logistics Gati Kausar India Ltd. CONCOR Shree Shubham Logistics TVS Logistics Navkar Corporation Ltd.

Mahindra Logistics Gati TCI Apollo Logisolutions Hind Terminal OM Logistics 20Cube

Warehousing Services

Indian Players Major Indian Players

C. H. Robinson Toll Global Logistics Dachser DHL Kuehne Nagel DB Schenker Nippon Express

ProLogis Inc Gulf Warehousing Company Ascendas Maple Tree Big Yellow Group Plc. Safestore Holdings Plc.

Agility Logistics Dachser DHL Kuehne Nagel DB Schenker DSV Nippon Express Ceva

Major Global Players

5



Global Logistics Industry is ~USD 4 Trillion in 2013 representing 10% of Global GDP.

The global transportation services market is fastest growing sector with ~ 7% y-o-y growth since 2011

US accounts for more than a 42% of global transportation services sector

However, the focus will shift to Asian countries due to increasing intra-regional trade activities

India, Indonesia, Malaysia, Philippines, etc. have increasing intra-regional trade in combination with high GDP growth rate, thus transforming Southeast Asia into a new regional cluster

Air, 70 Water, 54

Ground, 2000

Air Water Ground

Mode of Freight ($ Billion)

Global Logistic Industry

Asia Pacific, 42.60%

Western Europe,

18%

USA, 17.70%

Other, 21.80%

Global logistics share by region 2011 OVERVIEW

54

68 61

76

63 73 72

82

60

74 67

59

71 66

88

67 77 77

85

63

77 71

0102030405060708090

100

Intraregional trade - total trade ratio (%)

2011-2020 average 2021-2030 average

SOUTH-EAST ASIA INTRA REGIONAL TRADE RESULTING REGIONAL CLUSTER IN ASIA

The increased importance of intraregional trade in combination with high GDP growth rate are transforming Southeast Asia into a new regional cluster

6



Critical Success Factors

Growth in Online Retail

Products delivered directly from manufacturer to customer rather than via distribution centers

Data Analytics

Improve truck utilization Optimizing route selection Improving customer service

Contract Logistics

Reduced logistics cost Ensure focusing on core business

Consolidation

Customers favoring large operators

Product Tracking

Technology integration of supply chain partners

Investment in Technology

Heavy investments in technology by large operators

Investment in Safety of Products

Investment in safety of products for damage free delivery

7



Source: EY: Warehousing Report, KPMG: Transport and Logistics Pulse, Singhi Analysis

Indian logistics market size is ~ USD 166.73 bn. which is largely unorganized

Road, 84 Rail, 43.4

Ports, 11.2

Air, 1.4

Industrial/Retail, 5.167

Agri, 1.4 Cold

Storage, 1.5

CFS/ICD, 1.3

Transportation,

140

Warehousing, 9.33

Services, 17.4

125

130

135

140

145

150

155

160

165

170

Logistics Industry Market Size FY13 (USD Bn)

CAGR: 21.16%

CAGR: 10%

CAGR: 10-15%

CAGR: ~ 15%

CAGR: 10-12%

CAGR: 10-12%%

60% 31%

8%

1%

CAGR: 8.6% CAGR: 5.1% CAGR: 10.5%

CAGR: ~ 14%

15% 16%

14%

~ 83%

~ 7%

~ 10%

55%

USD 166.73 Bn CAGR: 16%

Note Conversion factor: 1$ = INR 60

Organised, 6%

Unorganised,

94%

Organized – Unorganized Players

India, 4%

Rest of the

world, 96%

Contribution of India towards Global Logistics

8

CAGR: ~7%



Click to edit Master title style Major Demand and Growth Drivers

Increased demand for textile, auto, steel, cement, FMCG

Agriculture

Demand for temperature controlled agricultural warehousing and transportation

Pharmaceutical

Temperature controlled storage and transportation to reduce the spoilage of medicines

E-Commerce

E-commerce industry is growing at CAGR of 35-40%

Investment in E-Commerce Logistics to support high growth rate

Manufacturing

Infrastructure Investment

Huge amount of investment is made by govt. in road, rail, air, port, warehousing

Eg. Golden Quadrilateral, East-west and North-south corridor, FTWZ, Logistics Park

Govt. policy support

Allowing 100% FDI in almost all logistics sub-segment

GST implementation will result in further consolidation

Demand Driver

Growth Driver

9



Click to edit Master title style Opportunities in Indian Logistics Industry

Outsourcing Logistics

Ensuring focus on core business

Thus increased 3PL players expected to grow at CAGR 21.16%

E – Commerce Logistics

Strong emergence of E-Commerce

Large players are introducing a dedicated E-Commerce logistics business.

E.g. Gati Ltd introduced dedicated E-Commerce Logistics unit

Express Logistics

Need for Just in Time delivery, time bound delivery and parcel/cargo tracking system results in double digit growth (17%) of Express Logistics

Infrastructure Investments

Govt. focus on infrastructure. E.g. golden quadrilateral, east-west and north-south corridors

Tax break for foreign investors in cold-storage, agri-warehouse and FTWZ

FDI

FDI in multi-brand retailing India permits 100% FDI in

most logistics sub-segments

GST

GST will result in consolidation of warehouse and increased secondary transport

Increased PE Investments

PE investments into the sector saw 43 per cent growth because freight business has shown signs of stabilization

DHL planning to invest 100 mn euro in express, ecm, freight forwarding

1

10

2 3

4

5 6

7



Click to edit Master title style ..Opportunities in Indian Logistics Industry

3PL logistics expected to growth at CAGR of 21.16% from 2013-18 Reason being:

o to reduce logistics cost o focus on core business

3PL outsourcing is largely used by industries such has Retail,

Infrastructure Equipment's, Chemical and Industrial Products, Pharmaceuticals, Consumer Products, Automation, IT Hardware and Telecommunication

OUTSOURCING LOGISTICS 1 E-COMMERCE LOGISTICS

E-Commerce growing at CAGR of 35% to 40%. Thus E-commerce logistics growth at same pace is must to support growing e-commerce

67%

33%

16% 12% 6% 6% 4%

0%10%20%

30%40%50%60%70%

80%

Propensity to Outsource Logistics sub-segment

11

1 2




EXPRESS LOGISTICS

Large players in industry expected to grow by consolidating with small players

Share of documents is expected to decline due to use of Internet and IT; and share of manufacturing and ecommerce is expected to increase

Increase in online retailing is giving further boost to express delivery. Large players are focusing on express delivery due to increasing timely and quick delivery needs from customers

Large players, 72%

Medium sized (semi-

organized), 15%

Small players, 13%

Share of Organized Players (%)

Wider network & better systems; operates domestic and international locations

Limited network; intra-city and state level markets

Operates in regional markets and presence in multiple region

Express logistics contribute 3% to Indian logistics and is growing at CARG of 17%

INFRASTRUCTURE INVESTMENT

Golden quadrilateral East-west and north-south corridor Maritime agenda to increase container traffic Investment in non-major port due to increasing traffic at CAGR of 20% Investment in Dedicated Freight Corridor Huge investments in FTWZ, Logistics park, cold storage

FDI

100% FDI via automatic route is allowed for almost all segments of logistics industry

Segment % of FDI allowed

Road 100%

Port 100%

Storage & Warehousing (including agri and cold chain) 100%

Courier Services 100%

Air Transport Services 49%

Railways 100%

..Opportunities in Indian Logistics Industry

12

3 4

5

National, 28%

State,

51%

Rural,

21%

2008-12 (XI Plan)

National, 41%

State, 46%

Rural, 13%

2013-17 (XII Plan)

INR7366 BN INR3394 BN



Several distributed warehouses

Fewer consolidated warehousing cluster and moving towards

hub and spoke model

Eliminate existing inter state sales penalties

- Reduction in no. of warehouses - Improved efficiencies - Better control and reduction in inventory

- Advantage of Economies of scale - Reduced capital deployed in business

Facilitate consolidation of warehouses, vendors, suppliers

- Larger warehouses results in state-of-art planning and systems - IT cost of having ERPs deployed at small warehouses can be saved

Transportation lot size increase and results in bigger trucks

- New distribution model : Hub and Spoke model - Removal of C&F distributors

7


Re-organized countrywide networks would decrease cost of primary freight since warehousing locations are likely to be placed closer to manufacturing/import/export locations. In contrast, this would increase secondary freight due to fewer warehouses.

Impact of GST on Logistics Sector

Pre-GST Post-GST

13

6




• Trucking – FTL, LTL • Project Logistics (e.g. ODC) • Last mile services • Express cargo • Equipment management (E.g.

Trailers, Cranes) • Cold Chain

• Godowns • Modern warehouses • Express cargo hubs • LTL transshipment centers • Road linked logistics and food park • Logistics Park • Cold Storage

• Cold Chain • 3PL and 4PL • VA services – packaging, track and

trace, JIT, insurance • Relocation services • Courier services • Reverse logistics • E-Commerce Logistics

• Container Train Operations (CTO) • Bulk and Break (bulk transport) • Passenger train cargo • Infrastructure and ancillaries (E.g. DMIC

and wagon production) • Cold Chain

• Inland Container Depots • FTWZs • Rail – linked MMPLS • Bulk cargo terminal • Custom bonded warehouses • Yards and covered warehouses • Cold Storage

• Freight consolidation (LCL, FCL) • Container stuffing / de-stuffing • Customs handling • Rail – led 3PL services

• Shipping – container, bulk cargo • Ports and port management (E.g.

dredging, berthing) • Port services (e.g. Pilotage, towage,

stevedoring)

• Container Freight Station (CFS) • Port – based yard and covered

warehouses • Tank farms for POL • Shipyard (build / repair) • Custom bonded warehouses

• Customs clearance • NVOCC • Container stuffing / de-stuffing • Buffer yard storage • Pre Delivery Inspection (PDI) • Port- led 3PL services • Marine Logistics

• Air Cargo Operations • Related infrastructure like airports and

aircraft

• Air Cargo Centers (ACCs) • Express Cargo Hubs

• Air Cargo and Courier services • Freight Forwarding • Customs Clearances

Transportation Warehousing Value Added Services

Ro

ad

Rai

l W

ater

A

ir

Mo

des

Range of Services

Asset Heavy Asset Light

High Medium Low

Level of Investment Activity in Logistics sector in India

* Based on announced deals over 2011-2014

8


High investment activity in 3PL, CFS, Air Freight

Forwarding, Cold Chain, E-

Commerce Logistics

14

7



Click to edit Master title style Logistics Sector – Deal Credentials - Mergers Alliance

15

Nok Airlines Public Company Limited

MA Thailand acted as financial and commercial advisor in forming a joint venture with Scoot Airlines

Advisors debt finance

MA France supported Necontrans on raising €121M debt finance with

a club of 8 banks and a long-term loan underwritten by BPI

Necotrans

Advisors to acquirer Advisors to seller

MA France advised Grizzli - Distri Mobile Systems shareholders on the sale of a majority stake to a

private investor

Grizzli - Distry Mobile Systems

Advisors on merge

MA Spain advised on the merge of Seguriber and Grupo Umano. Post

acquisition, the new company reached a combined turnover of

EUR 150m and employ more than 6,000 workers.

Grupo Seguriber Umano

Advisors on debt restructuring

MA Germany design a financial

and operational restructuring

concept in co-operation with a

CRO

Universal Marine

Bookrunner on IPO

MA Poland was able to collect

one of the highest value of

entries within a consortium,

consisting of 8 banks, amounting

$474m, or 295% of the Offer

PKP Cargo

Logistics Group

Advisors to sellers

MA Brazil acted as exclusive

financial advisor to Moving on

their sale of 50% stake to Vinci,

a global company, based in

France

Moving

Advisors debt finance

MA UK advised the shareholders

of Addison Lee on the growth

capital investment by The

Carlyle Group (Carlyle)

Addison Lee

Advisors to financial investors

MA UK advised private equity

firm LDC on the management

buy-out of The Pallet Network

(TPN)

The Pallet Network

Advisors to acquirer

MA Latin America Neal & Massy

Holdings Limited on the

acquisition of 84.6% stake

Barbados Shipping & Trading

Company Limited

Neal & Massy Holding

Limited

Advisors to fund raising

MA UK advised the management

and shareholders of CitySprint

on a growth capital fund-raising

to support the ongoing buy and

build strategy of the business

City Sprint

Advisors to seller

MA USA acted as sole advisor to

Overnite Express in their sale to

Norco delivery services

Overnite Express



Click to edit Master title style Logistics Sector – Deal Credentials - Singhi Advisors

16

Advisors to seller

Sale of controlling stake in

Routes Travel by GE Shipping to

Air Travel Bureau Ltd.

Routes Travels Ltd.

Advisors to seller

Sale of 100% stake to 150 years

old, James Mackintosh & Co.

Pvt. Ltd.

Gordon Woodroffe

Logistics Ltd.

Advisors to buyer

Advisory services for acquisition

of 100% stake in Inter Freight

(Forwarders) Pvt. Ltd.

Total Logistics Pvt. Ltd.

Advisors to seller

Sale of 100% stake in Speedage

for INR 2 bn to TNT Group

Speedage Express

Cargo

Strategic advisors & fund raising

Strategic advisory & fund raising

for its CFS business

Saurashtra Container

Ltd.



Mergers Alliance Team

17




Bruno Ruiz Arrue – Partner, Spain

Phil Seefried- CEO, USA

Jean-Pierre Brice - Partner, France

Chayot Vitayanonektavee - Partner, Thailand

Mariusz Piskorski, Vice-President-

Poland

Owen Hultman, Director - Japan

Ervin Schellenberg - Managing Partner,

Germany

Anand Bhageria – Partner

Email: [email protected] Tel: +91 22 61496633

Mobile: +91 9930116000

Steve Currie, Partner - UK

Narayan Shetkar - Director

Email: [email protected] Tel: +91 22 61496620

Mobile: +91 9920738451

Leonardo Antunes - Managing Director,

Brazil

Mergers Alliance Logistics Sector Team

18




NEW DELHI

37, Gulmohar Marg

DLF Phase-II,

Gurgaon -122002

Tel: +91 124-4109888, 4203888

Fax No.: +91 124-4385888

Email:[email protected]

Co

rpo

rate

Off

ice

MUMBAI

1307, Crescenzo,

Opp MCA Club,

Bandra - Kurla Complex,

Mumbai-400051

Tel: +91 22 6149 6666

Fax: +91 22 6149 6677

Email: [email protected]

Website: www.singhi.com B

ran

ch

Off

ices

BANGALORE

#47, C- Block ,

Fourth Floor,

Diamond District

Bangalore – 560 038

Tel: +91 80 3290 8814

Fax: +91 80 41612009

Email:

[email protected]

AUSTRALIA

101 Princess Street, Kew,

Victoria 3101,

Australia

Tel: +61-3-98550075

Email: [email protected]

This document is provided upon the express understanding that the information contained herein, or made available in

connection with the proposed arrangement, is strictly confidential and is only intended for the exclusive use of authorized

recipient. This [note/article/presentation/brochure/ memorandum/document] shall not be photocopied, reproduced,

distributed or transmitted to others or modified at any time without the prior written consent of “SINGHI ADVISORS”. This

[note/article/presentation/brochure/memorandum/document] shall remain at all times the property of “SINGHI ADVISORS”. It

must be returned immediately along with any other informative material received in this connection, without retaining any

copies thereof upon request or forthwith, for any reason whatsoever, if the transaction is not concluded or the recipient has

no further interest in the transaction or if it has been delivered, intercepted or otherwise in whatsoever manner become

accessible by any recipient for whom it was not intended.

Confidential Information

“Singhi Advisors” has taken due care in preparation of this document. All information provided herein, has been prepared from publicly available

information, internal research and other sources believed to be reliable. Notwithstanding the above, it is not represented to be exhaustive or

authoritative in nature and Singhi Advisors or its employees shall in no circumstances whatsoever be liable or responsible for any inaccuracies,

omissions, mistakes or errors in this paper and for any economic or any other loss or damage, incurred or suffered by the reader/user or any other

person, arising (whether directly or indirectly) out of or in connection with such information. This paper is not to be construed as rendering

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solicitation of any such offer or invitation. Opinions expressed are subject to change without notice and the [reader/audience] is not entitled to rely

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correct any inaccuracies or omissions which may become apparent.

Notice to Recipient

Anand Bhageria – Partner Email: [email protected]

Phone: +91 9930116000 Narayan Shetkar - Director Email: [email protected] Phone: +91 99207 38451

Disha Jain - Analyst Email: [email protected] Phone: +91 96194 08833

Co

nta

ct

De

tail

s

Thank You

19

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