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Market Research Report : Logistics services market India 2013

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Logistics Services Market – India
February 2013
Executive Summary

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

                                                                          LE
                                                                                        Challenges

  Drivers & 
 Challenges
                   – Global Trade Boom




                                           M
                   – Rapid Economic Growth & FDI in Logistics  
                   – Growth in Retail SectorP                                               – Poor Infrastructure
                                                                                            – Lack of Skilled Manpower




                                         SA
                                                                                            – Warehouse Space Deficit
                   – Rise in e‐Tailing 
                   – Increased demand for Consumer Electronics and Durables
                   – Expansion of Auto & Auto Components Sector

                   Enterprise  Application  – ERP,  eBizNET –                        Identification Technology – Barcode, RFID
                    SC suite, Vin eRetail                                             Material  Handling  Technology  ‐ Automated 
 Technology        Communication  Technology  ‐ Global                                Guided  Vehicle  System  (AGVS)  ,  Information 
  Adoption          Positioning System (GPS) Tracking
                                                                                       directed System
                   Software Solution Providing Companies
                                                                                      Technology Adoption by Leading Players 

                                                                   Major Players

                Player A                                   Player B                              Player C
Competition
                Player D                                   Player E                              Player F
                Player G                                   Player H                              Player I


                                       LOGISTICS SERVICES MARKET IN INDIA 2013.PPT                                                   2
•Introduction
•Evolution
•Market Overview 

                                     LE  
      P
•Advantages of Services

     M
•Segments & Features

   SA
•Distribution Channel
•Role of Regulatory Bodies
•Drivers & Challenges
•Key Issues
•Technology Adoption 
•Competitive Landscape
•Transactions
•Strategic Recommendations
•Appendix
  LOGISTICS SERVICES MARKET IN INDIA 2013.PPT   3
Logistics sector primarily deals in transportation and storage 
operations and is significantly aided by logistics services 
                                                     LOGISTICS 
                                                      SECTOR



         TRANSPORTATION                                  STORAGE                          LOGISTIC SERVICES

      Container Rail Transport

           Road Transport
                                                       Warehousing

                                                       Logistics Park
                                                                              LE            Courier Service


          Express Logistics

                                               MPInland Container Depot                   Freight Forwarding

          Coastal Shipping

              Air Cargo                     S A Container Freight Station

                                                         Cold Chain
                                                                                               3PL/ 4PL


                                                                                           Reverse Logistics
          Project 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                                    4
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 



                                                                                       
  A Courier is a person or company that is engaged in                             distribution of the goods with ancillary and advisory 



                                                                                    E
  transporting, dispatching and delivering messages,                              services in connection therewith, including but not 



                                                                                   L
  packages and mail at some extra cost                                            limited to customs and fiscal matters, declaring the 



                                                         P
                                                                                  goods for official purposes, procuring insurance of 
                                                                                  the goods and collecting or procuring payment or 



                                                        M
                                                                                  documents relating to the goods


              Third Party Logistics (3PL)

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

                                                                                 Process of planning, implementing, and controlling 
                                                                                 efficient and cost effective flow of raw materials, in‐
                                                                                 process inventory, finished goods and related 
 3PL industry includes Logistics Solution Providers                              information, from point of consumption to point of 
 (LSPs) and shippers whose business processes they                               origin, for purpose of recapturing value of proper 
 support.                                                                        disposal



                          Key         Courier Service      Freight Forwarding         3PL     Reverse Logistics 

                                                LOGISTICS SERVICES MARKET IN INDIA 2013.PPT                                                5
Evolution of Courier Services




                                                  LE                                  1980s




                     P
                                                           1977




                  SAM          1837

                                                                Organized Courier      Courier industry 
                                                               came into existence     started gaining 
                                                                                         momentum 
                                       Introduction of 
           1774                       India Post Office 
                                             Act


                  Indian Postal System 
                   came into existence




                                  LOGISTICS SERVICES MARKET IN INDIA 2013.PPT                              6
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                                                     X6
                                 X%
                                               X5


                                                                                       
 20
                                       X4                                                                        a%


                                                                                    E
 15                       X3
                   X2



                                                                                   L
         X1
 10
                                                                                               b%


                                                       P
  5
  0
        20‐‐      20‐‐   20‐‐e        20‐‐e   20‐‐e




                                                    SAM20‐‐e


                                 Share of Logistics Services in Total Logistics Market in India
                                                                                                     A   B       C




        20‐‐                          20‐‐                     20‐‐e                   20‐‐e             20‐‐e            20‐‐e




                                                LOGISTICS SERVICES MARKET IN INDIA 2013.PPT                                       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                  INR units
  with numerous small unorganized players


                                                                                            
                                                                          400                                                                 f




                                                                                        LE
• The market was valued at INR a units in 20‐‐ and is                                                                A%              e
  expected to reach ~INR f units in FY 20‐‐                               300                                              d



                                                          P
                                                                                                                 c
• The market is estimated to maintain a steady growth                     200                     b
                                                                                        a
  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


     mile service for large organized players          SAM
    It thus makes the lesser known players very significant in the 
     market as they take upon the responsibility of providing last 
                                                                          100

                                                                             0
                                                                                    20‐‐         20‐‐        20‐‐e        20‐‐e     20‐‐e   20‐‐e

                                                                              Revenue Split of Courier Sector 
           Express/ Courier Categories in India
  Government                                                                                            o%
                                          India Post
  Administered

Global Integrators               UPS, FedEx, TNT and DHL
                                                                                                  n%                           m%
  Large Indian 
   Companies                  Blue Dart, DTDC, First Flight etc.



                                             Other Small Courier                                             M       N         O
   Regional Players
                                                Companies

                                                   LOGISTICS SERVICES MARKET IN INDIA 2013.PPT                                                    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




                                                                                         LE  
• 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



                                                           P
• 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 
                                                       S AM
        • Control  of  the  end‐user  customer  as  asset 
                                                                                       • Flexibility  of  services  across  different  carriers  and 
          operating  air  and  container  carriers  increasingly 
                                                                                         modes of transportation
          rely on forwarders wholesaling capacity 


        • Ability  to  provide  better  supply  chain  information                     • Ability to attract and retain high quality clients due 
          to customers                                                                   to higher growth and profitability




                                                      LOGISTICS SERVICES MARKET IN INDIA 2013.PPT                                                       9
                                             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 
                                                                                                  • Very  independent  middlemen  with 
   logistics offerings                          • Many  have  former  warehouse  and/or             forwarder roles
 • Leveraged 3PL service providers use            distribution experience                         • Non‐asset  owners  that  provide  a  wide 
   assets of other firms
                                                • Examples: DSC Logistics, USCO, Exel,              range of logistics services
 • Non‐leveraged 3PLs use assets 
                                                  Caterpillar Logistics, IBM                      • Examples: AEI, Kuehne & Nagle, Fritz, 
   belonging solely to the parent firm
                                                                                                    Circle, C. H. Robinson, Hub Group
 • Examples: Ryder, Schneider Logistics, 
   FedEx Logistics, UPS Logistics 


                             Based on Financial Issues                             Based on Information


                       • Provide  freight  payment  and  auditing, 
                                                                          • Significant growth and development in 
                         cost  accounting  and  control,  and  tools 
                                                                            this category of Internet‐based, 
                         for  monitoring,  booking,  tracking, 
                                                                            business‐to‐business, electronic 
                         tracing, and managing inventory
                                                                            markets for transportation and logistics 
                       • Examples: Cass Information Systems, 
                                                                            services
                         CTC, GE Information Services, 
                                                                          • Examples: Transplace, Nistevo
                         FleetBoston

                                                 LOGISTICS SERVICES MARKET IN INDIA 2013.PPT                                               10
3PL – Distribution Channel


                               SAMPLE 
                Transaction                                                  Transaction



                   Third                                                       Third 
                                                                                               Retailer/ 
   Supplier    Party Logistics                  Manufacturer               Party Logistics 
                                                                                               Buyers
                 Provider                                                    Provider



              Logistics Services                                          Logistics Services




                                   LOGISTICS SERVICES MARKET IN INDIA 2013.PPT                              11
Role of Government: Summary

                                         Ensuring 



                                                                   
                                      Competitiveness




                                P                              LE
      Laws


                             SAM         Role 
                                          of 
                                                                          Infrastructure Development



                                      Government




       India Post Office                                                  Foreign Direct
       Amendment Bill                                                      Investment




                            LOGISTICS SERVICES MARKET IN INDIA 2013.PPT                                12
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

                                                     Freight                                                           Reverse 
          Courier                                                                              3PL
                                                   Forwarding                                                          Logistics

                                                                                                             Government 
Financial                                  Diversification into                   High cost of               Concern for 
Institutions                               Logistics Business                     Logistics in India         Sustainability
Dependence on 
Courier                                                                                                      Garnering Customer 
                                           Improved                                                          Satisfaction
                                                                                  Phased 
                                           Transportation 
                                                                                  implementation of          Growing 
Growing Business                           Infrastructure
                                                                                  VAT                        Consumerism 
of Private Telecom 
Sector                                                                                                       among Indians
                                           Rising                                                            Economic Viability 
                                           Competitiveness                        Government 
Seasonal Business                                                                                            of Reusing Goods
                                           among Domestic                         Infrastructure 
Upsurge Due to 
                                           Companies                              Initiatives                Growth of Pharma
Occasions
                                                                                                             Market


                                                         LOGISTICS SERVICES MARKET IN INDIA 2013.PPT                               13
Reverse logistics is plagued by mismanaged returns, high 
                               SAMPLE 
distribution cost and retailer‐manufacturer conflicts


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


                                  • Transportation, warehousing, distribution and inventory management are the 
                                    major cost components of reverse logistics 
                                  • If companies find that total costs associated with reclamation
          High Distribution 
                                    efforts exceed total costs of new materials or products, firms would have no 
  Key          Costs                financial incentive for implementing a reverse logistics system
 Issues                           • So it becomes very important for logistics service providers to provide services at 
                                    competitive rates


                                  • Conflicts arise between retailers and manufacturers due to reasons involved in 
                                    product recall
            Retailer‐             • Retailers perceive that every product damages happen in the process of logistics 
                                    or in the production process, so every product demands full compensation
           Manufacturer           • Manufacturers, on the other hand, perceive that recalled products may be 
             Conflict               damaged by retailers, so every recalled product should not be given full 
                                    compensation
                                  • The above factors result in confusion of reverse logistics process initiation




                               LOGISTICS SERVICES MARKET IN INDIA 2013.PPT                                                 14
3PL is witnessing better productivity with rising investments 
in A, B, C & new supply chain tools 

                                           • IT implementation comprises 


                                                                                              LE  
                                                                              P
                                             mainly ZZ packages
                                           • A is one of the most popular IT 



                                                                             M
                                             tool being used across logistics 




                                                                          S A
                                                           Applications
                                                            Enterprise 
                                                                                           • Communication plays a key 
 • Direct data entry into 
                                                                                             role in logistics business
   computer
                                                                                           • Ensures speed and 
 • Technologies x, Y, Z,          Identification                           Communication
                                                       Competitive                           accuracy in customer 
   magnetic strip and A  are       Technology                                Technology
                                                        Advantage                            service
   used
                                                                                           • Helps in bringing in 
 • Used for tracking rail cars 
                                                                                             competitiveness among 
   and carton movement 

                                                           Handling
                                                           Material                          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                                  15
Public: Domestic Company – Player A (1/3)
Company Information                                                         Offices and Centres – India 
                        Player A
Corporate Address       5th Road, 6th Street, 
                        City A – 700 xxx
Tel No.                 91 22 6679 xxxx
Fax No.                 91 22 6679 xxxx
Website
Year of Incorporation
                        www.playera.com
                        19‐‐

                                                                         LE  
Ticker Symbol
Stock Exchange
                        53xxxx (BSE)



                                           MP
                        Bombay Stock Exchange                                           City X              Head Office


Products and Services
Category                                S
                        Products/Services
                                          A                                  Key People
                                                                             Name                          Designation
                                                                             Person A                      MD
                                                                             Person B                      CFO

                                                                             Person C                      CEO




                                                 LOGISTICS SERVICES MARKET IN INDIA 2013.PPT                              16
                                       SAMPLE 
 Public: Domestic Company ‐ Player A (2/3)
 Financial Snapshot                                                             Key Ratios
                                                                                                                y‐o‐y change 
                    Total Income        Net Profit/Loss INR mn                            Particulars                         2012       2011     2010        2009
    INR mn                                                                                                        (2012‐11)
                                                   35,858.4                     Profitability Ratios
40,000                               34,381.0                    3000
                          28,803.1                                               Operating Margin                   ‐0.19      8.78%     8.97%      7.61%     8.01%
30,000                                                                           Net Margin                         0.06       6.54%     6.48%      5.76%     6.24%
          20,836.4                                               2000
20,000                                                                           Profit Before Tax Margin           ‐0.15      8.44%     8.58%      7.77%     8.13%

10,000                                                           1000            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%
     0                                                           0               Return on Working Capital        ‐11023.91
                                                                                                                                   ‐
                                                                                                                                        50.35%    46.22%     36.95%
                                                                                                                              10973.56%
             2009          2010        2011          2012                        Return on Assets                   0.32        8.27%    7.95%      8.07%     8.62%
 Financial Summary                                                               Return on Fixed Assets             4.55       16.76%    12.20%   19.68%     23.75%

                                                                                Cost Ratios
• The company earned a net profit of INR 2,345.9 mn in FY 2012, as
                                                                                 Operating costs (% of Sales)       0.19       91.11%    90.92%   92.34%     91.90%
  compared to net profit of INR 2,228.7 mn in FY 2011
                                                                                 Administration costs (% of 
                                                                                                                    17.24      17.24%    0.00%      6.07%     8.64%
• The company reported total income of INR  35,858.4 mn in FY 2012,                Sales)
  registering an increase of 4.3% over FY 2011                                   Interest costs (% of Sales)        0.03       1.65%     1.62%      0.68%     1.12%

• The company earned an operating margin of 8.78% in FY 2012, a                 Liquidity Ratios
  decrease of 0.19 percentage points over FY 2011                                Current Ratio                    ‐48.94%       1.00      1.95      1.82      2.13
                                                                                 Cash Ratio                       ‐43.37%       0.26      0.47      0.63      0.83
• The company reported debt to equity ratio of 0.86 in FY 2012, a 
                                                                                Leverage Ratios
  decrease of 1.63% over FY 2011
                                                                                 Debt to Equity Ratio              ‐1.63%       0.86      0.88      0.70      0.52

 Key Financial Performance Indicators                                            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
             Indicators                     Value (09/01/2013)                  Efficiency Ratios
 Market Capitalization (INR mn)                       xx                         Fixed Asset Turnover              35.97%       2.53      1.86      3.39      3.77

 Total Enterprise Value (INR mn)                      xx                         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
 EPS (INR)                                            xx
                                                                                 Working Capital Turnover        ‐21677.73%   ‐1655.74    7.67      7.97      5.86
 PE Ratio (Absolute)                                  xx
                                                                                 Capital Employed Turnover         2.23%        2.33      2.28      2.37      2.07
                                                                                                                                         Improved           Decline

                                                       LOGISTICS SERVICES MARKET IN INDIA 2013.PPT                                                              17
Public: Domestic Company – Player A (3/3) 
Key Business Segments                                         Key Geographic Segments

         A                                                                   B

100%                                                          100%

                               X                                                        X



                                                                          
50%                                                            50%


 0%
           20‐‐

                                       P
                                                                 0%

                                                                      LE    20‐‐


Business Highlights

Description             News
                                    SAM
Overview



Recent Transactions


Reverse Logistics


                                   LOGISTICS SERVICES MARKET IN INDIA 2013.PPT              18
Appendix
                                            SAMPLE 
Ratio                          Calculations                              Ratio                        Calculations
                               (Operating                                                             Current Assets / Current 
Operating Margin                                                         Current Ratio
                               Income/Revenues)*100                                                   Liabilities 

Net Margin                     (Net Profit / Revenues) *100                                           {(Cash & Bank Balance + 
                                                                         Cash Ratio                   Marketable Securities) / Current 
                               (Income Before Tax / Revenues                                          Liabilities)} 
Profit Before Tax Margin
                               *100 
                                                                                                      Total Liabilities / Shareholders 
                                                                         Debt to Equity 
                               (Net Income / Shareholders                                             Equity 
Return on Equity (ROE) 
                               Equity)*100 
                                                                                                      {Total Debt / (Shareholders 
                                                                         Debt to Capital Ratio
                               EBIT / (Total Assets – Current                                         Equity + Total Debt)} 
Return on Capital (ROCE) 
                               Liabilities)*100 
                                                                         Interest Coverage Ratio      EBIT / Interest Expense
Return on Working Capital      (EBIT / Working Capital) *100
                                                                         Fixed Asset Turnover         Sales / Fixed Assets 
Return on Assets               (EBIT / Total Assets)*100 
                                                                         Asset Turnover               Sales / Total Assets 
Return on Fixed Assets         (EBIT / Fixed Assets) *100 

                               (Operating Expenses / Sales)              Current Asset Turnover       Sales / Current Assets 
Operating Costs (% of Sales)
                               *100 

Administration Costs (% of     (Administrative Expenses / Sales)         Working Capital Turnover     Sales / Working Capital 
Sales)                         *100 
                                                                                                      Sales / (Shareholders Equity + 
                                                                         Capital Employed Turnover 
Interest Costs (% of Sales)    (Interest Expenses / Sales) *100                                       Total Debt)



                                                LOGISTICS SERVICES MARKET IN INDIA 2013.PPT                                           19
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                                                   LOGISTICS SERVICES MARKET IN INDIA 2013.PPT                                               20

				
DOCUMENT INFO
Description: For the complete report, get in touch with us at : info@netscribes.com Logistics services marketIndiais on a growth trajectory owing to rapid globalization and 100% FDI allowance. Logistics services broadly encompass courier services, freight forwarding, third party logistics and reverse logistics. Growth in international trade is providing huge impetus to the demand for the logistics services. Growing competition in retail sector transcends need of reverse logistics to handle returns and store upgradation. Third party logistics providers need to customize their services and charge competitive rates to benefit from retail boom inIndia. E-tailing has revamped shopping experience by transforming it from a weekend to anytime activity that is having a favorable impact on courier and reverse logistics sectors. The report begins with an introduction section, classifying the logistics sector into transportation, storage and logistics services. The logistics services being the focus of the report are then segmented into four parts including Courier Services, Freight Forwarding, 3PL and Reverse Logistics. These four segments are then briefly introduced. The next section briefly illustrates the evolution of the four segments of logistics services that are considered in the report. Market overview section provides a brief snapshot of the logistics services market inIndia. To begin with, the share of logistics services in overall logistics market is shown, followed by the market size and growth in logistics services market inIndia. A brief snapshot of the overall market attractiveness of each of the segments has also been incorporated. The share and growth of the four segments in logistics services is also shown. Subsequently a brief overview followed by its market size & growth of the four segments are demonstrated. Advantages of Services section deals with the beneficial features of the four segments considered in the logistics services.