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Logistics Services Market – India February 2013
Executive Summary Market
• 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
Drivers
Drivers & Challenges
Technology Adoption
P M SA
LE
– 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 Enterprise Application – ERP, eBizNET – SC suite, Vin eRetail Communication Technology ‐ Global Positioning System (GPS) Tracking
Challenges – Poor Infrastructure – Lack of Skilled Manpower – Warehouse Space Deficit
Identification Technology – Barcode, RFID Material Handling Technology ‐ Automated Guided Vehicle System (AGVS) , Information directed System
Software Solution Providing Companies
Technology Adoption by Leading Players Major Players
Competition
Player A
Player B
Player C
Player D
Player E
Player F
Player G
Player H
Player I
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•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
P M SA
LE
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Logistics sector primarily deals in transportation and storage operations and is significantly aided by logistics services LOGISTICS SECTOR
TRANSPORTATION
STORAGE
Container Rail Transport
Warehousing
Road Transport
Logistics Park
Express Logistics Coastal Shipping Air Cargo Project Logistics
P M A S
LOGISTIC SERVICES
E L
Inland Container Depot
Container Freight Station
Courier Service
Freight Forwarding
3PL/ 4PL
Cold Chain
Reverse Logistics
Port
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 LOGISTICS SERVICES MARKET IN INDIA 2013.PPT
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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
Freight Forwarding 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
A Courier is a person or company that is engaged in transporting, dispatching and delivering messages, packages and mail at some extra cost
Third Party Logistics (3PL) Third Party Logistics (3PL) involves outsourcing activities related to logistics and distribution
P M A S
Courier Service
Reverse Logistics
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
3PL industry includes Logistics Solution Providers (LSPs) and shippers whose business processes they support.
Key
E L
Freight Forwarding
3PL
LOGISTICS SERVICES MARKET IN INDIA 2013.PPT
Reverse Logistics 5
Evolution of Courier Services
P M SA
LE
1980s
1977
1837
1774
Organized Courier came into existence
Introduction of India Post Office Act
Courier industry started gaining momentum
Indian Postal System came into existence
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The logistics market is growing at a CAGR of X% of which c% is comprised by Services segment Logistics Market Size and Growth
Logistics Market – Segmentation
INR units
c%
25 20 15 10 5
X6
X% X1
X2
X3
X4
0 20‐‐
20‐‐
20‐‐e
20‐‐e
X5
P M SA
20‐‐e
20‐‐e
E L
a%
b%
A
B
C
Share of Logistics Services in Total Logistics Market in India
20‐‐
20‐‐
20‐‐e
20‐‐e
LOGISTICS SERVICES MARKET IN INDIA 2013.PPT
20‐‐e
20‐‐e
7
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‐‐
INR units 400 300
P M SA
• 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
200 100
LE
a
f A% c
b
e d
0
20‐‐
20‐‐
20‐‐e
20‐‐e
20‐‐e
20‐‐e
Revenue Split of Courier Sector
Express/ Courier Categories in India Government Administered
India Post
Global Integrators
UPS, FedEx, TNT and DHL
Large Indian Companies
Regional Players
o%
m%
n% Blue Dart, DTDC, First Flight etc.
Other Small Courier Companies LOGISTICS SERVICES MARKET IN INDIA 2013.PPT
M
N
O
8
Freight forwarders’ exhaustive understanding of transport business ensures cost effectiveness for its clients 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
LE
• 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
Factors Favoring Freight Forwarder
P M A S
• Control of the end‐user customer as asset operating air and container carriers increasingly rely on forwarders wholesaling capacity
• Flexibility of services across different carriers and modes of transportation
• Ability to provide better supply chain information to customers
• Ability to attract and retain high quality clients due to higher growth and profitability
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SAMPLE
3PL Providers – Types Based on their Functions Types of 3PL Providers
Based on Transportation • 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
Based on Warehouse/Distribution
• Many have former warehouse and/or distribution experience • Examples: DSC Logistics, USCO, Exel, Caterpillar Logistics, IBM
Based on Forwarder
• 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
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3PL – Distribution Channel
SAMPLE Transaction
Supplier
Third Party Logistics Provider
Logistics Services
Transaction
Manufacturer
Third Party Logistics Provider
Retailer/ Buyers
Logistics Services
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Role of Government: Summary Ensuring Competitiveness
Laws
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Role of Government
India Post Office Amendment Bill
Infrastructure Development
Foreign Direct Investment
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Drivers ‐ Summary
SAMPLE 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
Courier Financial Institutions Dependence on Courier Growing Business of Private Telecom Sector Seasonal Business Upsurge Due to Occasions
Freight Forwarding Diversification into Logistics Business Improved Transportation Infrastructure
Rising Competitiveness among Domestic Companies
3PL High cost of Logistics in India
Phased implementation of VAT
Government Infrastructure Initiatives
LOGISTICS SERVICES MARKET IN INDIA 2013.PPT
Reverse Logistics Government Concern for Sustainability Garnering Customer Satisfaction Growing Consumerism among Indians Economic Viability of Reusing Goods Growth of Pharma Market
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Reverse logistics is plagued by mismanaged returns, high distribution cost and retailer‐manufacturer conflicts
SAMPLE
Key Issues
Mismanagement in Segregating Returns
• 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
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 reclamation efforts 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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3PL is witnessing better productivity with rising investments in A, B, C & new supply chain tools
Identification Technology
Competitive Advantage
P M A S Communication Technology
Material Handling
• Direct data entry into computer • Technologies x, Y, Z, magnetic strip and A are used • Used for tracking rail cars and carton movement
Enterprise Applications
• IT implementation comprises mainly ZZ packages • A is one of the most popular IT tool being used across logistics
LE
• Communication plays a key role in logistics business • Ensures speed and accuracy in customer service • Helps in bringing in competitiveness among service providers
• Loading, unloading and storage of goods in warehouses • Reduces need of labor force • Automated material handling becomes useful in areas of hazardous goods LOGISTICS SERVICES MARKET IN INDIA 2013.PPT
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Public: Domestic Company – Player A (1/3) 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
Products and Services Category
P M A S
Products/Services
E L
City X
Head Office
Key People Name
Designation
Person A
MD
Person B
CFO
Person C
CEO
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SAMPLE
Public: Domestic Company ‐ Player A (2/3) Financial Snapshot Total Income
INR mn 40,000 30,000 20,000 10,000
28,803.1
Key Ratios
Net Profit/Loss INR mn 34,381.0
35,858.4
3000 2000
20,836.4
1000
0
0
2009
2010
2011
2012
Financial Summary • The company earned a net profit of INR 2,345.9 mn in FY 2012, as compared 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
Particulars Operating Margin Net Margin Profit Before Tax Margin Return on Equity Return on Capital Employed Return on Working Capital Return on Assets Return on Fixed Assets Operating costs (% of Sales) Administration costs (% of Sales) Interest costs (% of Sales)
• The company reported debt to equity ratio of 0.86 in FY 2012, a decrease of 1.63% over FY 2011
Leverage Ratios
Market Capitalization (INR mn) Total Enterprise Value (INR mn) EPS (INR) PE Ratio (Absolute)
Value (09/01/2013) xx xx xx xx
2010
2009
‐0.19
8.78%
8.97%
7.61%
8.01%
0.06
6.54%
6.48%
5.76%
6.24%
‐0.15
8.44%
8.58%
7.77%
8.13%
0.48
15.42%
14.94%
13.74%
13.07%
14.71% 13.18% ‐ 50.35% 10973.56% 8.27% 7.95%
13.53%
13.95%
46.22%
36.95%
1.52 ‐11023.91 0.32
8.07%
8.62%
4.55
16.76%
12.20%
19.68%
23.75%
0.19
91.11%
90.92%
92.34%
91.90%
17.24
17.24%
0.00%
6.07%
8.64%
0.03
1.65%
1.62%
0.68%
1.12%
‐48.94%
1.00
1.95
1.82
2.13
‐43.37%
0.26
0.47
0.63
0.83
Cost Ratios
• The company earned an operating margin of 8.78% in FY 2012, a decrease of 0.19 percentage points over FY 2011
Indicators
2011
Profitability Ratios
Liquidity Ratios
Key Financial Performance Indicators
y‐o‐y change 2012 (2012‐11)
Current Ratio Cash Ratio Debt to Equity Ratio Debt to Capital Ratio Interest Coverage Ratio
‐1.63%
0.86
0.88
0.70
0.52
‐20.15%
0.27
0.34
0.24
0.17
‐3.90%
5.39
5.61
11.27
7.20
35.97%
2.53
1.86
3.39
3.77
3.01%
1.25
1.21
1.39
1.37
36.26%
5.10
3.74
3.59
3.11
‐21677.73%
‐1655.74
7.67
7.97
5.86
2.23%
2.33
2.28
2.37
2.07
Efficiency Ratios Fixed Asset Turnover Asset Turnover Current Asset Turnover Working Capital Turnover Capital Employed Turnover
Improved
LOGISTICS SERVICES MARKET IN INDIA 2013.PPT
Decline
17
Public: Domestic Company – Player A (3/3) Key Business Segments
Key Geographic Segments
A
B
100%
100%
X
50% 0%
50% 0%
20‐‐
Business Highlights Description Overview
News
P M SA
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X
20‐‐
Recent Transactions
Reverse Logistics
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Appendix
SAMPLE
Ratio
Calculations
Ratio
Calculations
Operating Margin
(Operating Income/Revenues)*100
Current Ratio
Current Assets / Current Liabilities
Net Margin
(Net Profit / Revenues) *100
Cash Ratio
Profit Before Tax Margin
(Income Before Tax / Revenues *100
{(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
Return on Equity (ROE) Return on Capital (ROCE) Return on Working Capital
(Net Income / Shareholders Equity)*100 EBIT / (Total Assets – Current Liabilities)*100 (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
Current Asset Turnover
Sales / Current Assets
Administration Costs (% of Sales)
(Administrative Expenses / Sales) *100
Working Capital Turnover
Sales / Working Capital
(Interest Expenses / Sales) *100
Capital Employed Turnover
Sales / (Shareholders Equity + Total Debt)
Interest Costs (% of Sales)
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