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Konkan Shipping Company

Prepared by:
Berty Thomas
T. A. Pai Management Institute
Manipal,
Karnataka

Ph.

9164563683

Email:

meberty@gmail.com
berty.11@tapmi.edu.in

000/. More than 1000 trucks ply through this route everyday. Once expanded. The cost of transporting the trucks by the sea route. reducing the maintenance costs of the highways and numerous other benefits to the society as a whole. With the increased traffic density.300 MT capacity cargo ship that can carry 220 trucks at a time. The service is initially planned on a weekly basis on a 3. on a per truck basis. zero delays at check points. the occurrences of accidents are on the rise and the roads are becoming exceedingly difficult to use and maintain. Transportation of goods through these roads pollute the surrounding areas by burning huge amounts of fossil fuels that increase the import burden of these fuels for the country. this service will save more than a crore litres of diesel every year. etc. saving fuel and bringing multiple benefits to the society. time and other costs for the truck owners and helping the society as a whole. . The future calls to rethink the way we look at our transport system. Hence by providing the service at a cost of Rs. The project will be first implemented in the Mumbai-Mangalore route on a pilot basis. reducing the highway vehicle density.per truck. thereby reducing the pollution. Taking advantage of the 7200km long coastline. The solution may not necessarily lie in expanding our road networks alone. improving the quality of air in the highway surroundings. The business plan is to provide a roll-on-roll-off service for trucks from one port to another thereby saving the fuel. Apart from the savings on fuel costs. This means that the trucks can be driven onto the cargo ship from one port and can be driven off at the other port. The fossil fuel saved in a year of service is 39 lakh litres considering just the Mumbai-Mangalore route. works out to be just 20% of the fuel cost of transporting the truck on a highway. we bring to you this unique business model aimed at easing pressure on our roadways. as it is not scalable beyond a certain point. octroi charges. there are other benefits that the truckers can have like zero tolls.With the rapidly expanding economy. the pressure on our roadways is increasing day by day.6. the truckers make a saving of 49% on the fuel cost alone.

Hence lower wear and tear. 6.Need gap The rising costs of fuel are decreasing the profit margins of the various trucking companies. The poor condition of the roads is also increasing the maintenance costs of the trucks and decreasing its operating life. This model saves 39lakh litres of fossil fuel when compared to the road transport and 15lakh litres of fossil fuel when compared to the railways.000/. This area receives high rainfall during the monsoons and hence during this period. Lower maintenance cost: The maintenance required for the truck would be reduced. Increase in trucker’s profit margin: Adopting this service increases the trucker’s profit margin to 66% (taking Rs. . as the truck is not in use for this 900km journey. 18. A number of checkpoints.per truck.000/. the highway is decongested and can be used efficiently for other vehicles. Decongestion of the NH-17: As the trucks do not take this route any longer. Lower national dependence on fossil fuels: The fuel required for the ship voyage is significantly lower than the combined fuel requirement of the trucks. thus jeopardizing the lives of many people who use the highway every day.as the truck rate from Mangalore to Mumbai) since the proposed cost of service is Rs. it becomes exceedingly difficult to transport goods. The congested highway is also increasing the rate of accidents. tollbooths on this route is causing delays and hence increasing the delivery time. Value proposition Lower cost: The transportation cost per truck in this model is 49% lower than the fuel bill of the truck to ply between Mangalore and Mumbai and 24% lower than the railway rates.

the market potential and growth opportunities is huge. No detentions at check points. which is offering such a service in the country. we can utilize the transit time by working on it during transit and hence this does not become idle time as in usual case.880 trucks a year. However. this service also targets directly at industries that operate trucks by themselves. Given the size of the trucking industry in this region. toll to be paid as otherwise.000 trucks use the RoRo service of Konkan railways. However. Target customers The customers for this business are the trucking industry who gets their business from industries like Automobile. we can optimize the supply chain. Hence the total market size is around 3. etc The contract deals will be struck with truck owners and not the users of the cargo service. Other benefits: No hassle of octroi. the demand is so huge that trucks still ply on the road though at a higher cost. there is no other competitor. The closest competitor to this service is the Konkan Railway Corporation Ltd. Steel. Construction. Also the KRCL model . No risk of accidents. FMCG.Cross-docking: This is one process improvement value add that we can provide to the different companies that use this service. The service frequency can be increased with increase in investments and also the routes can be expanded. Another 40.14 lakh trucks use the highway (NH-17) between Mangalore and Mumbai. (KRCL). Hence the target penetration of the market will be 6% of the total market size. There are over 1000 trucks plying in this route every day and hence the initial constraints will be more on the supply side rather than the demand side. Cargo services. Market size Currently approximately 3. which is also offering a RORO service. By cross docking. The service in phase-I will have an annual capacity of 23. In this way. Competitor analysis Currently. Lower pollution levels.54 lakh trucks a year.

This can be a potential risk to the business. Scalability 3. Expansion opportunities along 1. Poor port infrastructure 2. Among the indirect competitors are the railways and the highways. a draft of new policy on the same is ready and is likely to become a regulation in the next 23yrs as Coastal shipping safety code. High demand Weaknesses 1. SWOT analysis Strengths 1. Another possible is the risk in delay of obtaining the license for the service as similar service does not currently exist in the country. Delay in obtaining licenses 2. Perceived risks Being a very attractive market. which is 49% cheaper than road transport and 24% cheaper when compared to the railways taking into account the fuel cost alone. High profit margin (58%) 2. The primary differentiating factor is the cost of service. they have a high waiting period of 35days for booking the slots. Differentiating factors over competitors Currently. . Though the railways are faster in terms of absolute service times. Regulations under International shipping (Merchant Shipping Act) Opportunities Threats 1. However.has a limitation on the scalability given the number of goods trains that can be accommodated in the single lane Konkan rail network. there are no direct competitors to this business. Hence the market will continue to be a demand > supply model. Hence when we take the total time. Further capacity expansion in the same route is possible. Big players entering this market east coast and other ports 2. as they will have a greater ability to move towards higher capacity shipping which will further reduce the costs involved on a per truck basis. there exists a risk of big players entering the market. it will be comparable to that of roadways and faster than the railway service.

Hence.000 per truck (1+1 axle. of trucks = 220 (Assuming 15T trucks) Pricing: Calculating the fuel cost of the truck if it were to ply on the road from Mangalore to Mumbai assuming a mileage of 3. 15 Tonne) . Hence taking all these factors into consideration. 11. 3. one in Mumbai and another in Mangalore will take care of the administration and logistics of the business. 7. Total distance = 1100km (approx) Speed = 20 kmph (11knots) Time = 60 hrs Fuel consumption per day = 7. Two offices.600/- Hence this is the variable cost of transportation for the konkan railways.500 Also Konkan Railway Corporation Ltd.000/- Cost per truck = 3. cost per trip = 8.96. The headquarters will be in Mumbai.5kmpl: Total Distance = 900km Fuel required = 257 litres Cost of fuel = Rs. 60 trucks are transported in a single rake of goods train in the route. 1.Service calculation details The proposed service in Phase-1 of the business plan is between Mangalore and Mumbai providing one service a week in each direction. 6.250 Carrying capacity of ship = 3.82.800*45 = Rs. Also.300 MT No. 4. Proposed cost of service = Rs. on an average. 6.56.3 MT Cost of bunker fuel = $500 per MT Fuel cost per day = Rs.800 litres of diesel.900 per truck. It is known that each trip consumes 8.96.000/60 = Rs.500 Total fuel cost for trip = Rs. provides RORO service at the rate of Rs.

8. That is.00.000/.40.15. pilotage expenses.500 * 220 * 2 = Rs.000 Port charges include port dues.000 . 5. 15.500 Weekly profit = 3.992 for Mumbai. vessel charges and berth hire charges.000 Yearly profit after tax = Rs. Hence port charges per year = Rs.40. 1.000*220*2*26 = Rs. The charges depend on the Gross Registered Tonnage or GRT of the vessel.15. out of total capacity of 220 trucks. For the capacity of the given vessel (1. 16.000 It should be noted that the breakeven for each service is just 90 trucks.Financials Total cost per voyage = Rs.00.14.20. Insurance charges (cargo) = Rs. To provide the same insurance cover.40.500 Profit per truck = Rs.472/. 50. Yearly profit on service = Rs. 25. 1.per port call for Mangalore and Rs.900). 9.000 Hence.000 Marketing and Admin costs = Rs. the port charges is calculated to be around Rs. 25. 31.000 (fuel cost is 85% of total ship expenses) Cost per truck = Rs. 3.80.000 per truck (June-November) Additional profit = 1. 5.per 15MT truck.05.00. to cover the yearly insurance costs. 5.137 Konkan railways provide an insurance cover of Rs.000 (52 weeks) Monsoon surcharge = Rs. total yearly operating profit = Rs. 2. anything more than 90 trucks is profitable for the company.50.96. we need to take the marine insurance policy under “open policy” of United India Insurance.

63 Net Profit 4.83 55.20.25.96.589.16.72.50.66 87.48.00.06.23 1.65.62. Rs.968.00 Fuel costs 4.49.15 10.13 4.00 3.000.46.000.72.90.000.333.00.000.589. Rs.00 Maintenance 66.16 29.298.00 1.44.61 20.00 1.00 49.97 Port costs 31.86.50 Gross Profit 6.54.00.77.00 56.000.52.851.365.00.00.41.03.000.000.709.00 32.57.67.000.12.35 .00 75.00 90.449.55 8.78.049.155.05.97.99.Profit & loss statement (projected) Income Annual revenue 2012-13 2013-14 2014-15 Rs.55.83.000.25 16.64.595.52.00 33.209.20 13.00 Total expenses 8.410.93.77.83.000.00.75 15.000.50.00.34.83.00 Expenses Ship lease 1.25.50 Taxes 1.60.000.40.92.223.79.84 26.137.000.634.20.98 2.79.18.65.00 6.187.40. 14.19 9.43 Insurance 16.51.000.000.993.47.87.10 Marketing & Admin 50.65.50.546.701.52.00 Salaries 75.

52.VC funding and bank loans .Do modifications/maintenance as required .000 Working capital initially required = Rs.000 This includes total marketing and administrative expenses for the entire year. The expenses for the remaining operations can be met with the income from the operations of first 3 months.55.Seeking insurance coverage for service February 2012: .Assumptions on projecting the P&L statement: 1st yr – 220 trucks per service.Applying for licenses for operations .90.Sales talks and contracts to be signed with trucking companies .02.500/.per truck 3rd yr – 440 trucks per service.Negotiations with cargo ship sellers May 2012: . fuel costs and maintenance costs of the ship for 3 months.Buy/lease cargo ship .Start operations .000/.57. 1. insurance costs for the year and port costs. Mumbai-Mangalore.38. Mumbai-Mangalore. 3. 2. Total initial investment = Rs. Mumbai-Mangalore & 220 trucks in Chennai-Kolkata route Investment required Lease cost of cargo ship per year = Rs.per truck 2nd yr – 440 trucks per service.Start of company registration process .000 Roadmap January 2012: . Price 6.Start hiring procedure for ship crew July 2012: . Price 6.

XXXXX COO Konkan Shipping Company Has worked in Merchant Navy for 2yrs and is now pursuing PGDM and specializing in operations and marketing. XXXXX CFO Konkan Shipping Company Has worked in Infosys Technologies and is currently pursuing PGDM and specializing in Finance.Management team: XXXXXX Founder & CEO Konkan Shipping Company Holds a Bachelor of Technology (Mechanical Engg). worked with Oracle Financial Services for 2yrs and is currently pursuing PGDM specializing in Marketing and HR. .

In addition to breadth-wise expansion. The company for its growth and expansion would be going for a public issue after 3yrs of operation. Exit plan This is a profitable and high growth business model with huge scope for expansion. However. A key route on the East coast will be the Chennai – Kolkata route. Development of exclusive loading and unloading zones will greatly decrease the turn-around time for the ship. a merger or acquisition by a larger shipping company may be an exit option. .Human Resources: Administrative and sales staff at both Mangalore and Mumbai is to be 25. CEO COO CFO Manager Operations (Mumbai) Manager Operations (Mangalore) Manager Administrations Sales & Admin team (Mumbai) Sales & Admin team (Mangalore) Accounts Staff Growth & Expansion: The growth prospect for this business model is very bright. The breakeven for the initial investment would happen in just 9 months of operation. Total employee strength in the initial phase not to exceed 40. It can be expanded connecting other ports in the western coast as well as connecting ports in the Eastern coast along similar lines. efficiency is another scope for improvement.

Exhibits: Port charges split: .

A Ro-Ro cargo ship: References: 1.com/prices/ 3. http://www.bunkerworld.asp?city=PORT&channelid=2825 8.com/ .in/mcargo. http://www. http://www.com/logistics/logtruck.in/CMSPage.jsp . http://jnport. http://www.blogspot.html 7.gov.maritimesales.htm 4. http://www.com/SEL10.aspx?PageID=26 9.infobanc. http://economics-times.By Prabha Shastri Ranade (Page No. http://newmangalore-port. 65) 6.Commercial – Freight services .konkanrailway.RoRo 5.uiic.htm 2.com/2010/01/affreightment-chartering.co. Infrastructure development and its environmental impact: study of Konkan Railway .com/default.