Market Research Report : Container rail market in India 2012

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Rail Transport Market – India

June 2012

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RAIL TRANSPORT MARKET IN INDIA 2012.PPT

Executive Summary

Market

Drivers & Challenges

Competition

Indian Railways has generated INR xx bn freight earning in the first 9 months (Apr ‐ Dec) of 2011‐12 with xx% CAGR over the period 2009‐10 and 2011‐12

Indian Railways has loaded yy MT freight loading in the first 9 months (Apr ‐ Dec) of 2011‐12 with yy% CAGR over the period 2009‐10 and 2011‐12

Drivers– Shift from Road to Rail by Private Players– Increasing Export‐Import– Dynamic Tariff Policy– Opportunity in Emerging Sector

Challenges– Service Quality– Increase in Rail Freight Rates– Problems with Connectivity

Major Players

Container Corporation of India Ltd.

(Concor)

Gateway Rail Freight

Ltd (GRFL)

Hind Terminals Ltd.

(MSC Group)

India Infrastructure & Logistics Pvt Ltd (APL)

Container Rail Road Services Pvt. Ltd (DPW)

Arshiya Rail

Infrastructure Ltd.

Operational Strategy

Marketing for Freight Freight Business Infrastructure Information Technology Rolling stock (Electrical) Rolling Stock (Mechanical)

3RAIL TRANSPORT MARKET IN INDIA 2012.PPT

•Introduction

•Market Overview

•Revenue Generation

Zone Wise Income

Commodity Wise Income

•Freight Services Initiatives

•Freight Marketing Schemes

•Vision 2020

Operational Strategy

•Drivers and Challenges

•Competition

•Future Requirements & Investments

•Strategic Recommendation

•Appendix

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Indian Railways ‐ Basic Statistics

Basic Statistics of Indian Railways (as of Feb, 2012)

No. of railway stations 7,083

No. of railway bridges 1, 31,205

No. of locomotives 9000

No. of freight cars 2,19,931

No. of route kilometers 63,974

No. of trains each day 19,000

No. of freight trains per day 7,000

Freight traffic per day 2.65 MT

No. of employees 1.36 mn

Annual revenue base INR 1, 060 bn

Freight Rates• From 1st Apr 2010, ‘Inflation Concession’ of INR 100 per wagon is approved on booking of food grains for domestic use and Kerosene Oil

• From 27th Dec 2010, the taper of the Base Class‐100 was rationalized resulting in increase in freight rates ranging from 0.15% to 3.95% from 101 to 500 kms and 4% beyond 500 kms which did not increase in freight rates of food grains and chemical manures

• Revision of classification of sugar and de‐oiled cakes from Class‐110 to Class‐120

• Indian Railways (IR) is the world’s 4th largest rail network and the 2nd largest in Asia• IR also happens to be the world’s fourth largest freight carrier• Rail freight in India, particularly container rail operations which was primarily controlled by government has been opened to private operators since 2006 in order to bring competition in the rail freight market

• Entry of private and public sector operators is permitted by Ministry of Railways to get licenses for running container trains on the IR network

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Rail Transport (Freight) Market – Value Chain

Rail Infrastructure Manager

Rail Freight Operator

Logistic Company Freight Forwarder

Freight Mode Transfer

Destination Terminal

Buyers

Other Modes of Freight Transport

(eg. Road)

Distributor

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Freight earning by Indian Railways grew at about 8% CAGR over the period 2009‐10 and 2011‐12

INR bn

a

b

c

d

e

0

Xx%

2011‐122010‐112009‐10

Market Size ‐ Freight Earning (By Value)

7.3%5.1%

5.3%6.2%6.4%

9.6%11.8%5.7%

1.7%

41.0% j

i

h

g

f

e

d

c

b

a

Note: Years correspond to Apr‐Dec period Data taken for ‘raw materials for steel plants’ does not include iron ore

Rail Transport Market – Overview

• Earnings from freight traffic (including ‘Other Goods Earnings’ such as wharfage, demurrage, etc.) by Indian Railways increased to INR xx bn in the first 9 months (Apr ‐ Dec) of 2011‐12 up by INR yy bn from the earnings in the corresponding period of the previous year

•Nine major commodity groups, namely coal, iron and steel, iron ore ( both for export and domestic steel plants), other raw materials for steel plants, cement, food grain, fertilizer, petroleum products and container traffic dominates the freight basket of Indian Railways

Bulk freight like coal, pig iron and finished steel, iron ore, cement, foodgrains, fertilizers and POL products contributed 86% of the total goods earnings in the first 9 months (April December) of 2011‐12 , while commodities other than the above accounted for 14%

Market Split ‐ Freight Earning

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Efficiency Indices ‐ Freight Operation

Efficiency Indices of Freight Operation Description 2007‐08 2008‐09 2009‐10 2010‐11

Net tonne kilometres per wagon per dayBG (Broad Gauge)

MG (Meter Gauge)

Wagon kilometres per wagon per dayBG

MG

Net tonne kilometres per engine hour

Diesel ‐ BG

Diesel ‐MG

Electric ‐ BG

Net tonne kilometres per engine day on line

Diesel ‐ BG

Diesel ‐MG

Electric ‐ BG

+ in terms of 8‐wheelers

* revised

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Central Railway

East Central Railway

East Coast Railway

Eastern Railway

North Central Railway

North Eastern Railway

North Western Railway

Northeast Frontier Railway

Northern Railway

South Central Railway

South East Central Railway

South Eastern Railway

South Western Railway

Southern Railway

West Central Railway

Western Railway

Indian Zonal Railways ‐ Snapshot

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• Central Railway covers a large part of the state of Maharashtra and parts of North‐Eastern Karnataka and Southern Madhya Pradesh

• It covers 3905.47 km of route network with 5975.33 km of track linking 477 stations

• It is divided into five divisions: Mumbai, Pune, Bhusawal, Nagpur and Solapur

• Freight business ‐major commodities carried are coal, imported coal, cement, petroleum products, indigenous fertilizers, sugar, containers, and onion etc.

Central Railway – Overview

Freight Revenue Earning Profile (By Value)

0.17

b

c

d

e

f

0

2011‐12

3.90

6.36

2.521.500.603.38

0.00

8.84

2010‐11

2.89

2.201.520.592.45

0.34

9.53

2009‐10

2.79

6.65

2.001.470.532.44

0.37

9.76

INR bn

a

6.36

j

i

h

g

f

e

d

c

b

a

Note: Years correspond to Apr‐Dec period

0.840.800.630.02 0.18

0.00

d

e

0

2011‐12

3.69

8.052.69

1.915.37

0.01

17.34

b

3.008.09

2.48 1.934.18 0.30

18.76

2009‐10

2.97

8.742.24 1.804.22

20.03

a

MT

c

2010‐11

0.00.3

Freight Loading Profile (By Volume)

Zonal Railways in India (x/x)

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xxx

Coal – Overview• In 2011‐12 (Apr ‐ Dec), IR carried xx MT of coal, 65% of the quantity being for thermal power stations, 11% for steel plants and the rest for other industries and public use

•Maximum coal is loaded by South East Central Railways followed by east Central railways in 2011‐12 as sources of coal would be ever more restricted to South‐eastern Coalfield and Mahanadi Coalfields

Note: Years correspond to Apr‐Dec period

MT

a

b

c

d

e

East Central

Central

f

g

0TotalWesternSouthernSouth

WesternSouth Eastern

South East Central

South Central

NorthernNortheast Frontier

EasternEast Coast

23.7% 0.4%

65.4%

10.5%

Coal Usage – Segments (2011‐12)

Coal Loading (By Volume) ‐ (2011‐12)

a

db

c

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Initiatives for Freight Services (x/x)

Segregation of freight and passenger corridors

Cost‐efficiencies in bulk transport Improving the transit speed

Construction ofdedicated freight corridors

Meeting customers needs in service delivery, logistics

services, transit time & tariff Initiatives for

Freight Services

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Schemes for Freight Marketing (x/x)

Special Freight TrainOperator Scheme (SFTO)

Terminal Development Scheme (TDS)

Wagon Investment Scheme

Wagon Leasing Scheme (WLS)

• xxx • xxx • xxx • xxx


Drivers & Challenges – Summary

Drivers

Shift from Road to Rail by Private Players

Increasing Export‐Import

Dynamic Tariff Policy

Opportunity in Emerging Sector

Challenges

Service Quality

Increase in Rail Freight Rates

Problems with Connectivity

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• Entry of private players in container rail business has intensified the competition and improved the efficiency in container rail services

• Privatization of container rail operations has attracted 16 players With 500 rakes expected to be operational by 2013 and full utilization level container rail operators expects to achieve 3% of the overall freight market by trying to shift volumes from road to rail Container rail industry has a capacity of about 300 rakes, of which Concor accounts for 220 rakes while the rest are with private players

• Private players with huge investments in the container rail business are planning for further investments Operators need to invest heavily in hard infrastructure such as rakes, terminals (ICDs/ rail sidings), containers, container handling equipment (reach stackers, etc) as also truck‐related and software investments in order to offer integrated, value‐added logistics solutions with last mile connectivity to shift volumes from road to rail To earn economies of scale and profitability operators need appropriate asset turnaround time and utilization levels

Shift from Road to Rail by Private Players (1/2)

Scope for capturing higher market share as rail freight gains popularity…

Impact

Share of Freight handled ( 2011‐12)

Only about 28% of the freight is transported by Indian Railways, while the remaining gets

transported via road, air and sea

Huge scope in rail freight due to its cheaper mode of transportation and

lower penetration level

Air Freight

0.1%

Sea Freight

15.6%

Road Freight

56.2%

Rail Freight

28.1%

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• Increase in service tax rate to 12.3% from 10.3% in the 2012‐13 budget brings a huge burden on rail freight with an expected rise of about 3.6% in rail freight rates from July, 2012 Service tax will be imposed on 30% of the value of input goods and services Commodities such as coal, cement, gypsum, steel and iron comprising 70% of the freight traffic will become expensive following the additional levy

• Increase in rail freight is adversely affecting the states like Punjab which is away from the coasts Punjab industry which is far from the coasts and also from the raw material is facing fierce competition from the other states which are near the coasts

•Products made in Punjab will become highly expensive for the other states as it is a net exporter selling almost 80% of its production to other states Steel prices will rise by 2%

•Exporters are also adversely affected with the increase in the freight rates in all commodities• Increase in rail freight rates by Railway Ministry –

Increase in Rail Freight Rates

Increase in rail freight charges likely to put negative impact on the manufacturing sector in India

Impact

Increase in coal freight

Increase in the power prices in Punjab

Adverse impact on future thermal power plants in Punjab

Increase in manufacturing cost

Losing competitivenessin manufacturing in India

Steel

Coal & Cement

Domestic Iron Ore15%

18%

50%37%

24%

‐‐ Food grains &

Fertilizer20% 35%‐

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Public: Domestic Company – Player A (1/3)

Key People

Products and Services

Company Information Offices and Centres – India

Corporate Address

Tel No.

Fax No.

Website

Year of Incorporation

Ticker Symbol

Stock Exchange

Category Products/Services

Name Designation

New Delhi

Head Office

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Financial Snapshot Key Ratios

Financial Summary

• The company earned a net profit of INR 8,800 mn in FY 2011, as compared to net profit of INR 7,800 mn in FY 2010

• The company reported total income of INR 40,900 mn in FY 2011, registering an increase of 4.6% over FY 2010

• The company earned an operating margin of 21.77% in FY 2011, an increase of 0.34 percentage points over FY 2010

• The company reported debt to equity ratio of 0.17 in FY 2011, a decrease of 18.96% over FY 2010

Key Financial Performance Indicators

Indicators Value (dd/mm/yyyy)Market Capitalization (INR mn) 113,3 00

Total Enterprise Value (INR mn) 91,000

EPS (INR) 69.13PE Ratio (Absolute)‐8th June, 2012

12.62

Particulars y‐o‐y change (2011‐10)

2011 2010 2009 2008

Profitability RatiosOperating Margin 0.34 21.77% 21.43% 22.56% 22.04%

Net Margin 1.54 21.45% 19.91% 21.35% 20.85%

Profit Before Tax Margin 0.36 25.91% 25.56% 27.80% 26.42%

Return on Equity ‐0.35 17.74% 18.10% 20.88% 23.19%

Return on Capital Employed ‐1.29 17.10% 18.39% 20.71% 22.90%

Return on Working Capital ‐2.38 38.22% 40.59% 50.73% 54.32%

Return on Assets 0.20 15.19% 14.99% 16.94% 18.64%

Return on Fixed Assets 0.37 32.82% 32.46% 35.08% 39.34%

Cost RatiosOperating costs (% of Sales) ‐0.42 77.14% 77.57% 76.15% 76.93%

Administration costs (% of Sales)

‐0.68 2.32% 3.00% 2.99% 2.09%

Interest costs (% of Sales) 0.00 0.00% 0.00% 0.00% 0.00%

Liquidity RatiosCurrent Ratio 26.33% 5.06 4.00 3.46 3.46

Cash Ratio 28.71% 4.41 3.43 3.10 2.99

Leverage RatiosDebt to Equity Ratio ‐18.96% 0.17 0.21 0.23 0.24

Debt to Capital Ratio ‐48.04% 0.01 0.02 0.04 0.05

Interest Coverage Ratio N.A. N.A. N.A. N.A. N.A.

Efficiency RatiosFixed Asset Turnover ‐6.37% 1.46 1.56 1.55 1.80

Asset Turnover ‐6.17% 0.67 0.72 0.75 0.85

Current Asset Turnover ‐6.79% 1.36 1.46 1.60 1.77

Working Capital Turnover ‐12.84% 1.70 1.95 2.25 2.49

Capital Employed Turnover ‐9.22% 0.79 0.87 0.93 1.06

Improved Decline

Total Income

Net Profit/Loss 40862.439053.836490.635213.1

0

20000

40000

60000

0

5000

10000

2008 2009

INR mn

2010 2011

INR mn


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Key Business Segments Key Geographic Segments

Business Highlights

Description News

Overview

Cost Rise

Partnerships

22%22%20%21%1%1% 0%

0%

50%

100%

2011

38,281

78%

0%

2010

37,057

78%

2009

34,524

79%

2008

33,645

79%

INR mn

0%

50%

100%

2011

100%

India

India is the only geographic segment in which the

company has been operating for the last five years


a b c

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Major Private Companies ‐ Summary

Size of the Bubble represents Total Assets in INR mn

Note: All figures are in INR mn and are based on the latest financials available

5,370

7,197

1,875

2,778

2,3691,666

‐1,200

‐1,000

‐800

‐600

‐400

‐200

0

200

400

600

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500

Total income

Net Profit/Loss

3,574

2,581

4,693

3,344

7,015

lk

jfdbihgeca

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Private: Domestic Company – Player B (1/3)

Key People

Products and Services

Company Information Offices and Centres – India

Category Products/Services

Name Designation

Corporate Address

Tel No.

Fax No.

Website

Year of Incorporation

Gurgaon

Head Office

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Financial Snapshot Key Ratios

Particulars y‐o‐y change (2011‐10)

2011 2010 2009 2008

Profitability RatiosOperating Margin 11.33 158.76% 147.43% 85.78% 85.47%

Net Margin 2.84 ‐39.51% ‐42.35% ‐34.24% ‐12.04%

Profit Before Tax Margin 14.83 ‐3.54% ‐18.36% ‐33.73% ‐13.47%

Return on Equity ‐1.56 ‐17.44% ‐15.88% ‐13.03% ‐2.17%

Return on Capital Employed 6.47 32.09% 25.62% 10.24% 8.61%

Return on Working Capital ‐9.23 ‐47.77% ‐38.55% ‐14.12% ‐32.91%

Return on Assets ‐0.61 ‐7.75% ‐7.14% ‐3.95% ‐1.20%

Return on Fixed Assets ‐0.73 ‐11.84% ‐11.11% ‐19.23% ‐544.86%

Cost RatiosOperating costs (% of Sales) ‐3.12 ‐84.18% ‐81.06% 13.85% 14.36%

Administration costs (% of Sales)

‐0.29 4.97% 5.27% 5.22% 1.90%

Interest costs (% of Sales) ‐24.46 8.02% 32.48% 0.00% 0.00%

Liquidity RatiosCurrent Ratio ‐10.05% 6.57 7.31 9.15 3.87

Cash Ratio 3.39% 6.02 5.82 8.58 2.69

Leverage RatiosDebt to Equity Ratio 4.88% 1.25 1.19 2.31 0.81

Debt to Capital Ratio 2.17% 0.56 0.54 0.70 0.45

Interest Coverage Ratio 311.83% 22.96 5.57 N.A. N.A.

Efficiency RatiosFixed Asset Turnover 20.93% 0.26 0.21 0.56 45.17

Asset Turnover 23.15% 0.17 0.14 0.11 0.10

Current Asset Turnover 38.14% 0.88 0.64 0.37 2.02

Working Capital Turnover 40.63% 1.04 0.74 0.41 2.73

Capital Employed Turnover 24.62% 0.38 0.31 0.38 0.18


Improved Decline

Financial Summary

• The company incurred a net loss of INR 543.89 mn in FY 2011, as compared to net loss of INR 495.22 mn in FY 2010

• The company reported total income of INR 1,376.65 mn in FY 2011, registering an increase/decrease of 17.7% over FY 2010

• The company earned an operating margin of 158.76% in FY 2011, an increase of 11.33 percentage points over FY 2010

• The company reported debt to equity ratio of 1.25 in FY 2011, an increase of 4.88% over FY 2010

Net Profit/LossTotal Income

1376.61169.3

559.6

222.9

0

500

1000

1500

‐600

‐400

‐200

0

INR mnINR mn

2011201020092008

22

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Business Highlights


Description News

Overview

Investment Plans

Projects

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Modernization Initiatives & Investment Requirements

•Based on the five‐pronged strategy ‘15 focus areas’ were identified in order to drive modernization

Core Assets1.0 TrackAnd Bridges

Signaling Rolling StockStations &Terminals

Revenue Models PPPs LandDedicated FreightCorridors

High SpeedTrains

Projects Review of existing and proposed Projects

Enablers ICT Indigenous Development Safety

Resources Funding Human Resource15.0Organization

Total Investment Requirements for Modernization

17.3%

36.4% 0.1%0.2%3.0%

19.6%

12.9%

6%

i

h

g

f

e

d

c

b

a

5

4,000

5,603

3,000 13 170

2,000

5,000

970

1,100

2,040

6,000

1,000

0

INR bn

725

330250


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