New Delhi: Steel pipemaker Jindal Saw Ltd is in talks to acquire a logistic firm that operates container trains and owns terminals for about Rs100-150 crore and expects to close the deal in three months, its managing director said on Tuesday.
“We are planning to acquire a company in this space which has terminals at critical locations. At that level, we would probably become India’s only multi-modal logistics company which has its own terminals, its own rail operations and also has ships,” Indresh Batra told Reuters in an interview.
India allowed private firms to run container trains about five years ago encouraging several private operators to take the plunge, but a global downturn that soon followed didn’t let the private firms settle in as trade shrank and volumes dropped.
Jindal Saw has a small presence in the logistics space at present through its unit Jindal ITF that runs 8 vessels and 3 barges around Indian coast, but is aiming to ramp up its presence quickly through an acquisition.
A deal will give it the ability to use rail to transport goods and inland depots to warehouse them, Batra said, adding the doesn’t intend to be a large shipping company but may own ships or tie up with other shippers to transport goods to Asian countries.
Jindal Saw is betting on the power sector, whose massive growth would also necessitate huge coal movement. A rising manufacturing sector in India would boost business scope for logistics firms, Batra said.
Jindal ITF also operates in urban water and waste management business and expects to gross about Rs900 crore in revenue in 2011/12.
Positive on pipes
Jindal Saw sees 30% sales growth in pipes business on strong demand emerging from the US and other countries that are laying pipelines to transport oil and gas, and many cities that are preparing to give its residents a better water and waste management systems.
“All our investment are in the core sector where demand for pipes, be it oil & gas pipes, seamless pipes or water and sanitation driven pipes, is rising because there is a fundamental investment that is happening,” Batra said.
Jindal Saw plans to raise $90 million in overseas loans in 3 months to fund expansion. It plans to spend about Rs1,300 crore in 2011/12 on pipe capacity expansion in India, Abu Dhabi and other projects.
The new capacities will come on stream by the end of this year, while a mine acquired in Rajasthan state about six months ago will become operational by September, Batra said.
Jindal Saw’s margins would expand by about 300 bps in January-March 2012 from now as company-owned mine would lower commodity and transport costs, he said.
The company’s order book as at February-end was at Rs6,000 crore, with more than half of that from overseas. The unrest in the Middle-East has had no impact on the company as its business is mainly spread in Iran, Iraq and Saudi Arabia, Batra said.
Shares in Jindal Saw, valued at about Rs5,000 crore, closed up 0.77% at Rs183 on Tuesday in a Mumbai market that closed 0.84% up.