Transport lifeline

Container Corporation is strengthening its leadership position as a pan-India logistics player

What differentiates Container Corporation of India (Concor) from its peers is its unmatched infrastructure — a handling capacity of three million twenty-feett equivalent containers (TEUs), 63 inland container depots and container freight stations, in addition to 250 rakes (trains comprising coaches and wagons). All other private players together have 150 rakes. The pan-India presence and low operational cost give Concor a significant edge over  competitors, which is set to be reinforced by a doubling of capacity to six million TEUs by FY17.

Concor, the Star PSU award winner, is India’s largest multi-modal logistics company, with a market share of about 75 per cent in container cargo transportation by rail. In FY15 it carried 36.18 million tonnes of the 48.83 million tonnes of containerised cargo transported by Indian Railways, or IR.
 

“The key strengths of Concor are its country-wide network of terminals, high speed rolling stock, state-of-the-art handling equipment at terminals, a robust information technology network and the huge intellectual capital of the company, besides excellent relationship and rapport with all stakeholders,” Concor Chairman and Managing Director Anil Kumar Gupta told <I>Business Standard</I>. In the years to come, he added, growth will come from the end-to-end logistics solutions provided by the company.

Unlike other players in the sector, Concor has a strong balance sheet with a debt-equity ratio of just 0.02. Its net cash flow from operations has grown at an annual rate of 14 per cent over 2011-2015, and as on March 2015 it had cash on the balance sheet of Rs 3,000 crore. As a result, it has been able to finance its ongoing capex of Rs 6,000 crore through internal accruals. As part of its five-year plan (2013-17), Concor will set up 15 multi-modal logistics parks in the country, with some coming up along dedicated freight corridors.

Meanwhile, the development of the fourth container terminal at JNPT (in Mumbai) should boost volumes, as the port accounts for 42 per cent of Concor’s revenues. The strong volume growth of 13-22 per cent annually between FY11 and FY15 at Mundra and Pipavav should also help, as the two ports together account for half of Concor’s overall revenues. Analysts say the biggest trigger, however, will be the eastern and western dedicated freight corridors, expected to be operational over the next four to five years.

Though the long-term growth triggers are in place, Concor’s performance in recent quarters has been hurt by the 35 per cent increase in haulage charges by IR in December 2014 — the ninth such hike by IR since the sector was opened to private players in 2006. Moreover, the increase in service tax in Union Budget 2015-16 and introduction of the Swachh Bharat cess, together with the haulage charges, are leading to loss of competitive advantage vis-à-vis road players.

Concor’s domestic volumes are being impacted by the passing on of these charges to customers. Gupta, however, believes Concor is ready to take on these challenges. “We have decided to go in for infrastructure creation in a big way by setting up multi-modal logistics parks. Fifteen such facilities are under commissioning at various locations and six more are planned. These will help Concor to provide a one-stop solution to shippers in the form of large warehousing and complete end-to-end logistics solutions,” he said.

In the first half of FY16, domestic volumes declined by 17 per cent to 212,000 TEUs, from 256,000 TEUs during the year-ago period. Making matters worse was the four per cent decline in export-import volumes in the first half, given the global slowdown. Revenue growth in FY15 at 15.7 per cent was lower than the FY14 figure of 19.6 per cent. Analysts expect Concor to be able to generate healthy cash flows from its operations, but add that robust volumes and revenue growth are likely to be pushed back to FY17.