Mumbai: Supply chain and logistics firm Arshiya International Ltd will invest Rs2500 crore to set up five Free Trade Warehousing Zones (FTWZ) across India by 2011-12, a top official told Reuters on Wednesday.
FTWZs are created near a port or a hinterland, which allow duty-free storage of imported goods and also provide space for assembling products, which are services provided by firms such as Arshiya.
The firm has already received approval from the Special Economic Zone Board for an FTWZ in Nagpur city in Maharashtra. It is looking to set up similar facilities in Mumbai and in Uttar Pradesh.
“Our first FTWZ will come up in April in JNPT (Jawaharlal Nehru Port Trust, Mumbai), second in September and the third, which is in Nagpur, in December,” chairman and managing director Ajay Mittal, said in a telephonic interview.
Mittal expects revenue at these FTWZs to be largely driven by the services - packaging, assembling and other logistical support.
“For every rupee of rental, we’ll be earning two rupees from the services,” he added.
Mittal is currently in talks with ports on India’s eastern coast for setting up an FTWZ there and hopes to acquire land by December.
To fund this second phase, the company aims to use cash accruals and debt, he said, adding it has already tied-up about Rs1,500 crore for the three FTWZs, Mittal said.
“Being an infrastructure company, we haven’t really leveraged ourselves. So, going forward, we can comfortably take our debt-equity to about 3:1,” he said. It has a debt-equity ratio of 1.9:1.
Arshiya is also expanding its rail operations and has placed orders with Titagarh Wagons Ltd to take its rake size to 30 in 12 months from 8 now on hopes of increased impetus on rail cargo movement, he said.
Last year, India recorded freight movement of about 2.8 trillion tonnes, of which the share of rail freight was about 30%, according to government data.
“So, even if the country grows at a modest 6% till 2010, which is being very conservative, the economy may also double, which may double the traffic movement in domestic market. So, we need to expand capacities rapidly,” he said.
With a 63,327-kilometre long network, the railways form an integral part of Indian life, transporting over 18 million passengers and over 2 million tonnes of freight daily.
But, nearly two-thirds of the country’s cargo is still transported over roads, and the railways opened the sector to private players to carry containerised cargo to regain its share.
Still, “there is no clarity, visibility about the progress of these projects... no deadline, timeline so far,” Mittal said.
Shares in Arshiya ended down 0.5% at Rs186.8 in a weak Mumbai market, which ended down 0.6%.