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With the logistics segment taking grip in India, Snowman, the country’s largest cold storage warehousing chain and newly listed, has a big plan to expand within and outside the country. Ravi Kannan, chief executive officer, talks to Aditi Divekar on this and to improve their margins. Edited excerpts:
You have expansion plans for FY15 where you are increasing capacity to 90,000 pallets from about 61,000 at present. Where do you see your company in the next five years?
As part of our bigger plan, we are looking to enter Bangladesh, Sri Lanka, Vietnam and Indonesia. Work on this front has started. Our in-house research shows these countries do not have very great warehousing facilities and with partners like Mitsubishi Corp, it is easy to enter these geographies. By the end of FY16, we will look at expansion in these regions.
What will be your strategy for the global market?
As these markets are similar to India, we will initially look at organic growth. We are still working on what will be the investment in these markets but our research hints at a cost close to what we have in India. This is Rs 55,000 for every pallet (a piece of equipment that facilitates mechanical handling of stacked goods), unless some local governments give tax benefits.
Your current business has Mumbai as its largest contributor in volume revenue. Don’t you think you need to spread evenly across?
Overall, we are strongest in the western region but it is not a conscious effort. We always go where there is strong consumption as well as a sourcing point and the western region has it. We see this pattern in the southern region now and so are expanding capacity at Chennai to 10,000 pallets by March. The consumption and sourcing point is main for us and, so, the unequal distribution of business is not a concern.
What are your plans for the India market? How do you plan increase your margins?
Apart from entering or spreading in newer regions within India, we are also looking at enhancing product lines and adding new segments, all by FY16. Today, we are serving the northeast via our warehouses in Kolkata but as volumes are rising, it is becoming very difficult for us to reach these places from there. The northeast has good opportunity for dairy and poultry products. We will expand there. Uttar Pradesh and Bihar also have a huge gap and, so, we’ll spread there as well. Among new products, pharmaceutical and industrial products, along with value-added services and small processing services, are the segments we plan to broaden.
What is the margin enhancement these new product lines will bring you?
Our pharma products contribute 10-12 per cent to the total revenue. We plan to double this by FY16, since our new warehouses are already well equipped to handle these products. In the value-added segment, which we started only six months earlier, its contribution is three per cent in a year’s time, we will look at least at 10 per cent. We have already made the needed investment to expand these revenue streams and, so, the asset cost is going to remain fixed. We will be only sweating the assets now and this will help us expand our margins from 25 per cent at present. Also, our customer stickiness will help us. No additional investment will be made.
