Bangalore: India will witness unprecedented growth in the goods transport business as companies become end-to-end logistic providers driven by demand from manufacturers of goods and a growing set of organized retailers. Such customers want logistic companies to store and manage inventory of their goods in addition to transporting them, industry experts said.
“Organized players will grow faster with their network and ability to provide logistics support to customers. We are no more the people who deliver goods from one destination to another,” said Vijay Sankeshwar, chairman of VRL Logistics Ltd, a Hubli, Karnataka-based company that owns the largest fleet of cargo vehicles in the country.
VRL, with a fleet of over 2,400 vehicles, took delivery of the first batch of trucks from the 600 it ordered, the largest in the private sector, from Ashok Leyland Ltd, India’s second-largest truck maker for Rs84 crore.
The privately run Rs450 crore VRL expects business to grow about 30% annually in the next few years.
“There is growing demand for organized logistics from foreign companies here who are used to organized logistics in their countries,” said R. Seshasayee, managing director of Ashok Leyland.
Single-vehicle owners account for close to 70% of India’s truck and transport vehicles. This share is expected to gradually come down.
“India is at the cusp of logistics revolution. Third-party logistics is being driven by consumer goods players, manufacturing companies and the retail industry,” said V.G. Ramakrishnan, director of the automotive and transportation practice at analyst firm Frost & Sullivan. US independent market analyst Datamonitor predicts high double-digit growth for both outsourced and contract logistics in India, one of the world’s fastest- growing economies.
“With India’s gross domestic product growing at over 9% per year and the manufacturing sector enjoying double-digit growth rates, the Indian logistics industry is at an inflection point, and is expected to reach a market size of over $125 billion in year 2010,” the research firm said in a recent report.
The demand from customers far outstrips supply, industry players said. “Even if there are 20 companies like us, it is still less to cater,” said Dayanand Agarwal, chairman and managing director of DRS Logistics Ltd, which runs services that includes home relocation under the brand Agarwal Packers and Movers and counts MRF Tyres and Mirc Electronics, the makers of Onida brand of consumer durables, among its customers.
Hyderabad-based DRS plans to add 200 trucks in a month to its existing a fleet of 550, even as it aims to double its turnover to Rs402 crore in the year ending March 2008. The private equity arm of Kotak Mahindra Bank invested Rs100 crore in DRS last month for an undisclosed stake.
C.R. Sukumar in Hyderabad contributed to this story.