Mumbai: Ajay S. Mittal, chairman and managing director of Mumbai-based logistics firm Arshiya International Ltd, seems oblivious of the slowdown.
In the past six months, his company has tied up with State Bank of India and other banks to raise around Rs1,600 crore for rail and warehousing projects, while rivals such as Transport Corp. of India Ltd and Shipping Corp. of India Ltd have halted expansion plans.
Arshiya bought two container trains last month, out of the 30 that Mittal expects to take delivery in the first phase of the firm’s rail expansion over the next two years, investing Rs626 crore.
The firm is also investing about Rs1,000 crore to construct free trade and warehousing zones, or FTWZs, near Jawaharlal Nehru Port Trust in Mumbai and at Khurja in Uttar Pradesh. These are expected to be ready for use early next year. Notification of the FTWZs is likely soon after the general election, the company said.
Free trade and warehousing zones are a category of special economic zones that offer a range of fiscal incentives for units operating out of these independent trading hubs that would also have warehouses, special storages and container freight stations.
“Even in this tough times, we are recruiting on an average 2.5 people per day. Most of them are white collar jobs for our warehouse and rail projects,” Mittal said in an interview on Wednesday.
“When others are slowing down, we are going ahead and executing projects. The logic is simple. When there is an upturn, we will be having the first-mover advantage,” said Paul Bradley, global adviser for Arshiya.
India’s logistics industry is estimated to grow to $125 billion (Rs6.27 trillion) over the next four years, from $70 billion now, according to various market estimates. Of this, organized third-party logistics—air and ocean transportation—is likely to grow to $11.3 billion from $4.6 billion. A significant portion of the remaining growth for the industry is seen coming from rail and road transportation, in which Arshiya operates.
For fiscal 2009, Arshiya reported consolidated revenue of Rs510.21 crore, up 25% from Rs407.44 crore the previous year. Its net profit increased 44% to Rs65.43 crore.
While Arshiya has bucked some of the current slowdown, it had to defer plans to set up a Rs150 crore free trade and warehousing zone in Sohar, Oman, Daily News and Analysis newspaper reported late March.
Mittal told Mint the delay was because of a lack of clarity from the Oman government on land acquisition, and that the company would channel the funds into India.
Arshiya’s main entities include Cyberlog Technologies International Pte Ltd, which provides IT system and software development, BDP India and Gulf, for shipping and logistics, Genco, which offers logistics for the retail sector, and Knowledge Centre, the company’s training venture. Cyberlog is owned by Arshiya, while others are joint ventures.
Arshiya plans to align its business segment so they mutually complement each other. For instance, cargo generated from its free trade zones will be transported by its container trains, while another division will help ship the cargo out of the country.
“The logistics potential is huge in India. Rail terminals will be integrated into FTWZ creating ease of operations with connectivity pan-India. Rail operations, IT solutions, freight forwarding, FTWZs and others will help to cut logistics cost,” Nijay N. Nair, head of strategic initiatives at Arshiya, said.
An analyst with a domestic brokerage, who didn’t want to be named because he’s not authorized to speak to the media, said Arshiya’s plans are robust and sensible on paper. “(But) in India, special economic zones could not take off well. So it will be tough to get clients on FTWZs. It is going to be critical how many corporations would be coming to Arshiya’s FTWZs in this slowdown.”
Mittal, however, said: “We have received formal letters of intent from over 150 organizations. The construction and funding had faced a slight delay because of (the) general election. The notification of our space as FTWZ is in progress.”