Logistics cos reinventing in face of booming economy, demand

Logistics cos reinventing in face of booming economy, demand
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First Published: Wed, Jan 16 2008. 11 57 PM IST
Updated: Wed, Jan 16 2008. 11 57 PM IST
Mumbai: Many of them are companies that have operated in the background—literally—for decades.
Now, companies that many have never heard of—AFL Pvt. Ltd, DRS Group, VRL Logistics Ltd, Direct Logistics India Pvt. Ltd, Safexpress Pvt. Ltd—are coming out of their shell.
They are all closely held firms providing logistical help to other companies, and amid a booming economy and surge in demand for their kind of work, many of them are starting to aim for a higher profile and, in the process, also reinvent themselves.
As they go after more revenues in what has become a Rs4 trillion logistics market, these firms are also attracting public and private equity to help reinforce their services and diversify into new businesses.
Consider cargo transportation firm DRS, which, armed with a Rs100 crore investment from the private equity (PE) arm of Kotak Mahindra Bank, now plans to enter the shipping and courier business. First Flight Couriers Ltd, which got about Rs100 crore from Singapore’s state investor Temasek Holdings, has already diversified into cargo plane and logistics operations. Road transportation firm Safexpress is also considering cargo plane operations.
More logistics firms are expecting PE funds while some such as VRL Logistics, DRS and Premier Logistics (Pvt.) Ltd are planning initial public offers.
“The domestic companies do not have the scale seen in global firms. Over the years, these family-managed companies have grown organically with internal resources. Now they are raising money to bolster their infrastructure. Some of them are even bringing in international partners,” says Vineet Suchanti, managing director, Keynote Corporate Services Ltd, a consulting firm that specializes in logistics. “Organized retail, hypermarkets and new means of purchasing cannot be successful without a robust logistics infrastructure. The closely-held logistics companies are now organizing themselves to become scalable on national and international fronts.”
Cyrus Guzder, chairman and managing director of AFL, which offers cargo transportation and express courier services, says family-owned logistics businesses are undergoing three simultaneous transformations. “They are thinking big; they are moving swiftly to scale up and they are inducting professional management. They are recruiting laterally from other businesses in their domain, also from the services sector in general and even experts from abroad,” he says.
AFL recently entered into an alliance with US-based United Parcel Service Inc. (UPS) for courier operations. “Many years ago, AFL moved decisively to separate ownership from management. Each distinct business was converted into a strategic business unit or separately branded division and a CEO was appointed with full power to run the day-to-day?operations,” adds Guzder.
Analysts attribute the change in style of operation to the retail boom that is creating a huge business opportunity. And technology is also helping fuel business. “We have implemented advanced software solutions to streamline business,” says Vineet Kanaujia, general manager, marketing, at Safexpress. “This has led to 30% growth and we are quickly moving up the value chain.”
The entry of global firms such as UPS, TNT NV, and DHL International GmbH has made them competitive and quality conscious. “Multinational corporations in India prefer to work with companies that possess the skill sets and service levels that they get in their own countries. Indian firms will have to raise their performance level and that is the only way to survive,” says Sunil Devrani,?MD,?Direct?Logistics.
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First Published: Wed, Jan 16 2008. 11 57 PM IST