Indian Logistics Industry Globally, the logistics industry is valued at US$ 3.5 trillion. (Source: CII) The U.S.

, which contributes to over 25% of the global industry value, spends close to 9% of its GDP on logistic services. The Indian Logistics Industry is presently estimated at US$ 90 billion, which is expected grow at around 10-12 % each year. (Source: CII) The industry has generated employment for 45 million people in the country in comparison with the IT and ITeS sector which employs approximately 4.3 million people.  It is forecast to grow at a Compound Annual Growth Rate (CAGR) of approximately 8% over the next three to five years. (Source: CII)     Strengths  India’s logistics story is indeed an attractive one, fuelled by factors like a rapidly growing economy, the increase in outsourcing of logistics and a significant government thrust on investment in infrastructure.  Additionally, changes in tax and regulatory policies like the plan to introduce a uniform Goods and Service Tax (‘GST’) to obviate the need for multiple warehousing will lead to a consolidation of the industry. Weakness  Less economy of scale due to high fragmentation within Industry.  Lack of skilled and knowledgeable manpower  Growth in infrastructure is not sufficient enough to support growth in sector. Opportunities  Boom in average income of average Indian. 128 million households are expected to have annual income between 2-10 lakh by 2025 as compared to 13 million in 2006.  10% annual growth in Manufacturing Sector  Indian logistics market is likely to cross the $ 200 billion figure by 2020, fueled by the consistent growth of the economy and key industries such as automotive, engineering, pharmaceuticals, and food processing. (Source: 'Yearly Sectoral Analysis: Indian Transportation Logistics')  Emergence of India as IT Super power which will enable logistics companies an IT support of International level.  Presently, Indian logistics industry is highly fragmented and is still evolving, with the top 100 listed players only having a miniscule 2 per cent market share.  Globalization of manufacturing systems coupled with advancements in technology is compelling companies across verticals to concentrate on their core competencies and avail the cost saving potential of outsourcing.  This is expected to contribute to an increase in the need for integrated logistics solutions, which is the niche, every Third Party Logistics Service (‘3PL Services’) provider is aiming to exploit. Threats  Supply Chain delays drive up the logistics costs  Fierce competition from not only the established players but majorly from unorganized ones.

Industry Statistics  The Indian logistics market recorded revenues of about $ 82.10 billion in 2010, witnessing a growth of about 9.2 percent over the previous year. (Source: 'Yearly Sectoral Analysis: Indian Transportation Logistics').  Annual logistics cost- 13% of the GDP out of which 4.3% is wasted due to various inefficiencies. (Current GDP=1.38 trillion USD)  Highly Unorganized with organized sector responsible only for 6% of the logistics activity although it is increasing with a rate of 20%.  Share of 3rd Party Logistics only 10%  The total logistics spend (total logistics market size) in India represents around 6.2 percent of the country’s total GDP. However, it represents about 11.6 percent of Services GDP (contribution of the services sector in the total GDP). (Source: The Automotive Horizon)      Political Over all government spend has increased from USD 10 billion to 30 billion and is expected to rise in near future. Special economic zones for development of Logistics parks. (Mumbai, Kolkata, Chennai and Hyderabad etc.) National Highway Development Project End of indirect tax regime after implementation of GST. Other tax reforms like VAT The much-awaited implementation of the nationwide uniform Goods and Services Tax (GST) regime, which was scheduled to become effective from April 1, 2010 has been delayed by a year by the Union Government due to non-agreement of several State Governments on the proposed tax revenue sharing model between the Centre and the States. However, since there has been no notable consensus on the issue between the Central and the opposing State Governments, the implementation of GST could be delayed further. On the other hand, market participants related to various industries have been hoping for a faster implementation of the new tax regime, because it is expected to bring in major transparency in tax policies, collections and also significantly reduce the tax burden for companies. Implementation of GST is also expected to revamp the supply chain process and logistics infrastructure for majority companies in each industry. Key Factors affecting the Indian Logistics Industry Growth in GDP and trade are the core drivers Supportive regulatory changes are catalyzing growth by removing inefficiencies Ongoing infrastructure buildup improves long-term prospects Containerization gains momentum; specific segments will benefit more

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Technological  As of 2010, only about two-thirds of the end users reported to using some form of technology solution to support their logistics functions. These solutions included basic inventory management packages and barcode systems. However, usage of exclusive logistics technologies such as warehouse management systems, transportation management systems and radio frequency identification is significantly low across industries. (Source: CEO, Frost & Sullivan)  India’s logistics technology market is set to grow at 19.8 percent between 2010 and 2015, to cross $ 600 million by 2015. This growth is driven by demand from the thriving logistics, retail and manufacturing sectors, as well as government promotion. However, these technologies are highly expensive, making them unaffordable for majority of logistics service providers and end users, thus limiting the full potential growth of the Indian logistics technology market. (Source: CEO, Frost & Sullivan)

Recent M&A and Equity Funding transactions in the Industry  The Indian logistics sector is expected to witness a consolidation wave, considering the reviving fortunes of the sector with booming end-user industries. Industry experts report that even private equity and venture capital firms are eyeing a slice of the logistics sector, which saw testing times for the last 12-16 months.  FedEx’s acquisition of AFL Logistics and Transport Corporation of India’s (TCI) 51 percent equity stake acquisition in Infinite Logistics Solutions Pvt Ltd. In 2010 (Source: The Automotive Horizon)

a Bangalore-based company that transports.such as Indian Railways and Container Corporation of India (CONCOR) in rail transport. a 3PL cold storage service provider for processed food and retail industries. stores. International Finance Corporation (IFC) invested $ 5 million in Snowman Frozen Foods Ltd. Government-owned units dominate the market in their respective segments . private equity firms and leading finance organisations have been actively investing in Indian logistics companies. a UK-based fund house that invests in logistics projects in India. The leading 3PL service providers in India continue to be those with a strong nationwide  surface transportation services such as TCI. companies such as Toll Global Logistics.  Eredene Capital. . Apart from these. FedEx and TNT have a strong brand presence in the country. and FH Bertling Ltd have been actively seeking to expand their size in India through the inorganic growth mode. storage providers and freight-forwarding agents. and distributes frozen and chilled foods.  In addition. )  Entry of global giants like Gazeley Broekmen (Wal-Mart's logistics partner). VC Circle) o NYK Line acquires stake Tata Martrade International Logistics in 2010 (Port Services) o Hitachi Transport Systems acquires stake in Flyjac in 2010 (Transportation) o PSA International acquires stake in Chennai Container Terminal in 2010 (Ports) o Toll Group acquires stake in BIC Logistics in 2009 (Transportation) o Louis Dreyfus Armateurs acquires stake in ABG LDA Bulk Handing in 2009 (Bulk Cargo Handling) New Entrants in the Industry  Entry of 3rd party logistics providers  Series of mergers and acquisitions leading to consolidation of industry (DHL acquired Blue Dart.  Expansion through franchisee Competitive Analysis  The logistics market in India is highly fragmented with several thousands of unorganised participants holding the dominant share of the market. Central Warehousing Corporation (CWC) in warehousing. but their market presence is high only in the Express Logistics Services segment. took 90 percent stake in MJ Logistics. Reliance and Bharti group.  Entry of large Indian corporate houses like Tata. Leading international logistics players such as DHL. Om Logistics and GATI. (Source: The Automotive Horizon)  Recent 5 M&A (Source: Deal Curry. These include unregistered transporters. Shipping Corporation of India (SCI) in ocean cargo. Allcargo Global Logistics. TNT acquired Speedage Express Cargo Service and Fedex bought over Pafex. CH Robinson and Kerry logistics.

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