Sep 27, 2016

CONCOR looks for M&A to double revenues in 5 years

19vzskp3-CONCOR_20_1590904eThe ₹ 6,000 crore CONCOR, the only listed company of Indian Railways with a cash surplus of ₹ 2400 crore and zero debt on its balance sheet, wants to double its revenues in next five years. CMD, Anil Kumar Gupta shares his future growth plans including mergers and acquistions. Excerpts:
Long term vision for the company:
The long-term vision is to make it a ₹ 12,000 crore in the next five years. We want to go international, have presence in more countries outside (presently we are in Nepal), be a more involved logistics player providing end-to-end logistics for companies. We would like to be in some areas of short sea shipping, by being a non-vessel opening common carrier so that we are able to handle end-to-end international movement, in association with shipping firms. We are in rail and road transportation, value-added logistics, air cargo and to some extent coastal shipping.
We would look at possibility of merger and acquisition of existing companies. We have not done any merger and acquisition as yet. But, we would like to have businesses in related fields and acquire firms instead of building them-ground up. This has been on our radar for quite some time. But, the business and shipping scenario in past has not been very good. We are waiting for some improvement in scenario when we can have a de-novo look at it. Being a PSU, we will be doing professional valuations as done before.
Capacity utilisation of present rakes and terminals:
We have some 300 rakes, whose capacity can be increased by 15 per cent. Moreover, with the coming of dedicated freight corridor, our use of railways’ wagons will go down because of double stacking involved. Today, for instance, we do 100 rakes of double stacking per month. We are open to ordering more wagons.
Has wagon procurement process increased now?
Not yet. Another reason for that is we are waiting for new designs for the (higher capacity) wagons of dedicated freight corridor route. We have given orders. But, we have requested the manufacturing companies to slow the supply down and wait for approval of designs of new wagons.
On Concor’s capital expenditure plans for the next few years:
Of ₹ 6000 crore capital expenditure planned for the five year plan of 2012-2017, we now think we will spend about ₹5300-₹5400 crore. We spend about ₹ 1100 crore a year. For the next five years, the Board has not yet finalised, but we think the same level of investment will be required in future.
On top emerging ports:
About 90 per cent business moves through Mundra, Pipavav, JN Port and Chennai. Remaining moves through Vizag, Krishnapatnam, Cochin and Kolkata. We feel for 3-4 years situation will remain unchanged with marginal movement towards Mundra and Pipavav. On West coast, we don’t see any other port emerging. On East coast, there may be a built of cargo. Paradip, which was not handling any containers, is now trying to get into the space. Krishnapatnam has come up very well and we have now started providing train services between Krishnapatnam and Bengaluru, Secunderabad; on a regular basis. Vallarpadam is coming up. Dhamra, also, we are hoping. We hope Kolkata will grow.
On Private Freight Terminals as a business:
PFT, for us, is just starting.
On international plans:
Container Corporation of India (Concor), the only listed firm of Railway Ministry, now plans to go international. It is now looking to acquire companies for mergers and acquisitions.
On traffic:
We had accepted a target of 12.5 per cent in April from the Ministry. But looking at present trend, we will expect a growth of 8-9 per cent.
We have already lost four months. We have re-defined the target to 8-9 per cent. From October-end particularly, we expect to see an increase. Revenue-wise, the reset will be similar.
We are seeing some good signs in domestic.
On impact of recent policy changes by the Railway Ministry:
We have been talking to people for parcel traffic. They have not yet come forward as they feel rates are very high. We have to talk to the Ministry on their expectations. Other commodities being allowed will have some positive impact, which we have started seeing. They had opened 46 commodities.
On FHEL facility:
We are concerned with FHEL. Last year, we only focused on leasing of chambers, which was not very good. This year, because of Kashmir issue, Kashmiri apples have not come. Himachal (Pradesh) apples are very costly.
The management has decided to float an expression of interest in Rai invite parties to manage and operate the complex.
On e–commerce players as customers:
E-Commerce players have started talking to us seeking warehousing space from where they can aggregate and supply.
What is the latest on route between Islamabad and Istanbul?
There are two Trans Asian Routes – One is from Kumling, China to Rotterdam, Europe – where trains are being operated. The second is planned from Singapore to Europe via South Asia and Turkey.
For train from Turkey to Islamabad, a start has been made and trials are there. The plan is to extend this train from Islamabad to (Delhi, Kolkata) India, which can go up to Dhaka. The plan was to have protocols between India, Bangladesh and India, Pakistan in place so that container trains can operate on this route. That meeting was to be held in October. But, now, with the given situation, we don’t know.
From Dhaka, there is a metre gauge-cum-broad gauge line, which can come to Delhi, then Attari (on India Pakistan border) and then to Lahore, and subsequently Iran, till which there is broad gauge line. Then Turkey has a small sea move movement involved, on which they have to build a track, and the train can then go up to Europe.
Last meeting, it was decided that Indian Railways, Bangladesh Railways and Pakistan Railways will be meeting so that the train from Islamabad could run via Attari, Delhi, Kolkata, Gede-Darshana (India-Bangladesh border) to Dhaka.
Strategy ahead given that the average lead of trains is coming down:
This has to vary depending on traffic. Concor’s strategy will have to be focus on short distance; and hub and spoke.
On continuity in Board, at a time when fresh faces are joining:
The succession plan was decided long before. These officials were part of our team and have answered investor conferences. We must have done 40 conferences, of which 38 they were spearheading. When I joined, I had decided that there should be no succession crisis. There is no discontinuity. Person is never important. Concor is in safe hands.
On difficult times faced while deciding succession plan:
Many leaders don’t share everything with people down below as they think somebody will take over. I don’t agree with that view. So, people should be clear with the team below…We have had no dissents in the Board. We had a dream run in last 9 years!