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Logistics Track
Research4India Fortnightly update on Logistics Industry

In The Spotlight
Japanese Logistics firm SG Holdings invests in Sindhu Cargo Services

Contents

News of the fortnight SG Holdings Company Limited of Japan has invested ` Rs 900mn in Sindhu Cargo Services Limited and its sister concern Sunlog Services Private Limited for an aggregate stake of 40% in each of the entities. The investment will be done in two tranches, with 26% in first tranche and 14% in the second tranche. Sindhu Cargo Services started its operations offering Single Stop Logistics Solutions since 1987 having a market presence throughout India. Its services include custom brokerage, freight forwarding, warehousing, and transportation to consulting in EXIM policies in India. Headquartered in Kyoto, Japan, SG Holdings is one of the largest cargo companies in Japan. Established in 1957, SG holdings has a transport network both domestically in Japan and internationally. Its operations are divided into three segments of delivery, logistics and other businesses.

Investment Activity

News Update

Stock Market Updates

Peer Benchmarking

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Investment Activity
PE Deals in 2012 Date 6-Jan 23-Feb 23-Feb 28-Mar 30-Mar 26-Apr 19-Apr 29-Jun Investor General Atlantic IDFC Private Equity Target Foursee Infrastructure Equipments Ltd. StarAgri Warehousing & Collateral Mgmt Chhotu.in (Santa Claus Couriers) Spear Logistics e2E Rail VRL Logistics TVS Logistics Reverse Logistics Stake (%) NA NA Amount ($ mn) 20.8 30.0 Strategy Growth Growth Angel Growth Early Late Growth Growth

Global Super Angels NA NA Ambit Pragma NA 1.7 VenturEast, Zephyr Peacock NA 6.0 New Silk Route NA 33.4 KKR, Goldman Sachs 20.0 55.0 Vertex Venture Holdings, KPCB, NA NA Sherpalo Ventures The space saw 8 deals till date raising a total disclosed amount of $185.1mn.

Mergers & Acquisitions in 2012 Date 1-Feb 20-Apr 15-May 18-Jul 18-Jul Investor Oil Field Warehousing & Services DHL Express (India) Pvt Ltd DTDC SG Holdings SG Holdings Target Raamns Shipping & Logistics DHL Lemuir Logistics Pvt Ltd Eurostar Express Sindhu Cargo Services Sunlog Services Stake (%) NA 24.0 NA 40.0 40.0 Amount ($ mn) NA NA NA NA* NA* Business Logistics Services Logistics Services Courier Services Growth Growth

*SG Holdings have invested a total of $18mn in Sindhu Cargo Services and Sunlog Services which are sister concerns

The space saw 5 deals till date but the transaction details were not disclosed for any. In 2011, there were 11 PE deals in Logistics space worth $278.1mn. The largest among came from Warburg Pincus which invested $100mn in Continental Warehousing Corporation for un-disclosed stake. In the same year, 8 M&A deals in Logistics space. TVS Logistics acquired 100% stake in US based MESCO for un-disclosed amount. Amongst the disclosed, the largest was 100% stake by Royal Vopak in CRL Terminals for $61.8mn

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News Update
Amansa Investments exits Gujarat Pipavav Amansa Investments Limited sold off its entire stake in Gujarat Pipavav Ports Limited by selling 3,816,136 shares at ` 55.75 per share on NSE, amounting to ` 212.7mn and 4,500,000 shares at the same price on the BSE, amounting to ` 250.8mn, thus totaling a sale of ` 463.5mn. Amansa held 1.96% in the company as on June 2012. However, majority of this was bought by Franklin Templeton Investment Fund by purchase of 3,100,000 shares at ` 55.75 per share on the BSE and 2,976,000 shares at the same price on NSE representing an investment of ` 338.7mn and a 1.43% stake in the company. Gujarat Pipavav raised ` 3.5bn through a mix of QIP and preferential issue last week. Other major stakeholders in the company include IDBI Bank (5.92%), Credit Suisee (Singapore) (4.24%) and Newyork Life International India Fund (Mauritius) (3.48%) among others. Amansa Investments Ltd has an AUM of around $300mn has a focus on midcap companies in India. Its portfolio includes Whirlpool, Greaves Cotton, Blue Star and Edelweiss Capital to name a few. Gujarat Pipavav Port Ltd. handles container, bulk and LPG cargo at Pipavav port in the Saurashtra region of Gujarat. The company is promoted by APM Terminals (2005). APM Terminals is a part of AP Moller-Maersk Group - one of the largest container terminal operators in the world with a Global Terminal Network of 60 ports and 132 inland facilities in 63 countries. ADB to provide a $150mn loan improvement of rail freight services for about 840 kms of rail routes and electrifying about 640 kms. ADB will also support accounting reforms to improve operational and financial efficiency at Indian Railways. The program will be able to help in reducing fuel consumption and enhance energy efficiency, reduce pollution as well as enhance railway safety. It would also increase the line capacity and incorporate innovating financing modalities. The total cost of the Railway Sector Investment Program is $ 1,144.6 mn, out of which loan assistance from ADB is $ 500mn (in four tranches) and Indian government's funding is $ 644.6mn. This is the 1st tranche for a total US$ 343.4 million (ADB loan $ 150mn + Indian government's share $ 193.4mn). ADB will also provide a program linked technical assistance of $ 300,000 to promote sustainable transport modes by monitoring carbon emission reductions from shifting bulk goods from road to rail. Railway ministry and Rail Vikas Nigam Limited would be implementing the program. Mahindra Logistics scouting for overseas buyouts Mahindra Logistics, a part of the diversified Mahindra Group, has said that it is open to overseas acquisitions as part of its plan to become a $ 1-bn firm. However, neither a timeline to become a billion- dollar entity nor the possible deal size was disclosed. Mahindra Logistics wants to partner with players, who will support it in key markets like the US, Europe, Southeast Asia, China and Africa. The company will soon enter China, Indonesia and Thailand as part of a plan to extend its third-party logistics solution offerings. In the near-term, the company is looking at over 25% revenue growth in FY13 to over ` 17bn, notwithstanding the prevailing market conditions. Mahindra Logistics, which claims to be the largest player in the integrated third-party logistics services space, has presence in both supply change management as well as public transport solutions.

Asian Development Bank (ADB) will provide a $150mn loan to the Indian government loan under Railway Sector Investment Program to improve rail freight services and passenger transport routes. The amount will be the 1st tranche of the $ 1,144mn investment and will help the country improve rail services along some of its busiest freight and passenger transport routes, providing double-track for Research4India

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L&T, Pipavav Mazagon Defence form JV with Railway Catering and Tourism Corporation. The Department of Public Enterprises has invited applications from non-railway service employees for the post of Chairman and Managing Director. The post, at present, is held by the Railway Board members. This move will pave the way for more financial and administrative freedom for these PSUs as the post of their Chairman is at present held by the Railway Board members. This will also pave the way for the ` 40bn Concor to get Navaratna status soon, a move that will help the listed company take faster decisions, without waiting for approvals. Earlier, the Navaratna status eluded Concor despite its eligibility because the Railways hesitated from giving away the post of Chairman. Concor had even come out with a bonus issue in 2008 to qualify as a Navaratna, coinciding with Shipping Corporation of India getting Navaratna status. Concor plans to invest in port infrastructure, a move that will help it in forward and backward integration at a time when it is competing with companies such as APL, DPW, and Hind Terminals all of which are backed by shipping lines or large port terminal companies. Reverse logistics joins hands with Philips India Reverse Logistics Company Pvt ltd (RLC), a provider of comprehensive reverse logistics solutions has entered into an agreement with Philips to handle their reverse backend. RLC provides a one stop, technology enabled, comprehensive reverse supply chain solution by utilizing its pan-India hub and spoke model and specialized work force that is enabled through its proprietary technology platform. Recently, RLC had entered into similar agreement with Acer. Kerala government may invite fresh bids for Vizhinjam Port The Kerala government is likely to invite fresh bids for the Vizhinjam Port after the state government found it unviable to provide a grant as requested by the sole bidder for the project a consortium led by Welspun group. The consortium was the lone bidder to operate the

Larsen and Toubro and Pipavav Defence have signed two separate deals with the country's biggest naval shipyard, Mazagon Dock, to produce equipment for the defence sector. According to the joint venture signed, Mazagon will partner L&T to manufacture submarines for the navy while the venture with Pipavav will make frigates, destroyers and aircraft carriers. Mazagon dock was the first among the public sector companies to invite a joint venture partner to undertake its order book which runs into more than Rs 10mn. Mazagon's decision to award two joint venture projects comes at a time when the public sector shipyards have been struggling to complete projects on time. In 2011, the Comptroller and Auditor General (CAG) had rapped the public sector shipyards for their inadequate infrastructure and rising costs. Coal India to infrastructure invest ` 75bn on rail

Coal India Ltd reportedly to invest ` 75bn to develop railway tracks and related infrastructure to evacuate around 100 million tonnes (mt) of additional coal from Chhattisgarh, Jharkhand and Odisha. These would help the company to evacuate around 100 million tonnes of additional coal from each of the States. Non availability of transportation though Railways has been preventing the company from extracting coal from mines, the demand for which has surged from power plants. The miner is not able to transport more than 2 MT to 3 MT of coal through roads. Therefore, the remaining reserves remain unexplored. Most of the mines in these States have the capacity to produce around 10 MT. Concor may soon be a Navaratna The Indian Railways may finally loosen its grip and delegate work to the heads of its public sector units, such as Container Corporation (Concor), Dedicated Freight Corridor Corporation, Indian Railway Finance Corporation, Railtel, RITES, Ircon, and Indian

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project after the home ministry denied permission to Adani Ports to participate in the bid. Welspun had asked the state government for a grant of ` 4.79bn which was later revised to less than ` 4bn. Welspun has asked the state government to grant it the first right of refusal if a re-bidding is invited for the project, according to senior officials of Welspun. The Vizhinjam terminal, planned as a container transshipment hub with a capacity to handle 4.1mn TEUs a year, will be built on the socalled landlord model, where the state government will set up the infrastructure and invite an operator to run the port. MSC to partner Adani in new container facility at Mundra port Mediterranean Shipping Co. SA, or MSC, the worlds second-biggest container shipping line, and Adani International Container Terminal Pvt. Ltd will form an equal joint venture to develop and operate a container loading facility at Mundra port in Gujarat, according to the sources. This will be MSCs first investment in a container terminal in India. MSC is privately held by the family of Gianluigi Aponte, its founder and chairman. Gautam Adani-owned Adani Ports and Special Economic Zone Ltd (APSEZ) runs Indias biggest private port at Mundra. Adani International Container Terminal, a 100% subsidiary of APSEZ, was formed for developing a container terminal and associated facility at the south basin in Mundra port. The deal will help MSC get priority berthing at the new facility and APSEZ will gain from guaranteed volumes. The first phase of the new terminal with a capacity to load 1.5mn standard containers a year will be ready for operations by December. When the third terminal is fully operational, Mundra port can load up to 7.5mn standard containers a year. Ultimate Logistics, MEEL and Ushdev jointly offer to acquire 26% in Lloyd Steel Three companies, including Ultimate Logistics Solutions Pvt Ltd, Metallurgical Engineering Equipment Ltd (MEEL) and Ushdev International, have jointly made an open offer to acquire 26% stake in Lloyd Steel for over ` Research4India 3.16bn. The three have proposed to jointly acquire 271.5mn shares of Lloyds Steel at a price of Rs 11.65 per share. The offer, if fully accepted, will give the acquirers 26% of the 'emerging voting capital' of Lloyds Steel for an investment of Rs 3.16bn. The open offer follows Lloyds Steel shareholders' approval of a resolution to issue 380mn shares on preferential basis to Ultimate Logistics and MEEL. India No. 1 ship-breaking centre in world India now enjoys the dubious distinction of having emerged as the largest centre of shipbreaking in the world with 415 ships having been broken in the ship-breaking yards of Alang in 2011-12. Another 150 giant behemoths, used to ferry millions of tons of goods across the globe but no longer seaworthy, are waiting there to be broken down. From 1983 to 2012, statistics collected by Toxics Watch Alliance show that 532 toxic ships have been broken down along the Gujarat coastline. Pakistan has emerged as the number two ship-breaking country followed by Bangladesh and China, but in the latter country ships are broken in dry docks and not along the coast. Government of Gujarat plans board for transport safety With increasing modes of transport, the government of Gujarat mulls country's first Transport Safety Board on the lines of prevalent models in some of the developed countries like USA and Canada. Since 2007, the central government mulls formation of National Road Safety and Traffic Management Board following recommendations by S Sundar's committee. However, the bill for the same is yet to be passed by the central government. Ministry of shipping, road transport and highways is responsible for road safety in India. The Motor Vehicles Act of 1988 states that each state should have a road safety council and be headed by transport minister. States like Tamil Nadu, Andhra Pradesh and Maharashtra have such councils while Gujarat is yet to form council. Proposed board will have 4-5 members

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including chief secretary of government of Gujarat as chairman. the second half due to macroeconomic regulatory policies. China's economy expanded 7.6% year on year in the second quarter of 2012, slowing from 8.1% in the first quarter, data from the National Bureau of Statistics showed. The growth rate marked the sixth consecutive quarter of decline and marked the slowest rate since the first quarter of 2009. DHL Express launches its $ 175mn North Asia Hub DHL, the world's leading Logistics Company, today opened its biggest express hub in Asia the $175mn DHL Express North Asia Hub at the Shanghai Pudong International Airport. The company also announced plans to further invest $132mn to add eight dedicated aircraft to service high demand routes between Shanghai and North Asia, Europe and the US, by 2014. Covering a land area of 88,000 square meters, DHL Express' North Asia Hub can process up to 20,000 documents and 20,000 parcels an hour. Over the next two years, DHL's planned investment of $132mn will increase the dedicated capacity of its Asia Air Network by deploying eight freighter aircraft between Shanghai and North Asia, Europe and the US. DHL further plans to increase capacity on routes between the DHL Express North Asia Hub and other cities in mainland China and Taiwan. Over the next few months, DHL will add direct connections to Incheon, Taipei and Chinese cities such as Dalian and Qingdao, with Beijing and Xiamen likely to come on stream in 2013. Delek Logistics files for IPO of up to $135 mn Delek Logistics Partners LP filed with U.S. regulators to raise up to $135 million in an initial public offering of its common units. Delek Logistics, a subsidiary of Delek U.S. Holdings Inc, transports, stores and markets crude oil and refined products in southeast United States and west Texas. Delek U.S. Holdings, which is a part of Israeli energy, real estate and insurance conglomerate Delek Group has a market value of about $1.11bn. The proceeds from the IPO would be used to repay outstanding debt and

Global News Update

China echoes 2009 stimulus with Railway spending boost Chinas railway infrastructure investment may double in the second half of this year from the first six months, aiding efforts to reverse a slowdown in the worlds second-biggest economy. Full-year spending will be 448.3 bin yuan ($ 70.3bn), according to a statement on the website of the National Development and Reform Commissions Anhui branch. The document indicates a 9% increase from a previous plan of 411.3bn yuan. Spending was 148.7bn yuan in the first half. Chinas fixedasset investment has already started to pick up and a jump in spending on railway construction would echo the expenditure on rail lines and bridges that was part of stimulus during the global financial crisis. A decline in foreign direct investment reported by the government today underscored the toll that Europes debt woes and austerity measures are taking on Asias largest economy. China's Logistics Industry slows in first half China's logistics industry saw tempered growth in the first half this year amid the slowest economic growth experienced by the country since 2009. The China Federation of Logistics and Purchasing (CFLP) said in a statement posted on its website that the total value of the sector for the first 6 months grew by 10% year on year to 83.6tn yuan ($ 13.25tn). The growth rate was down 3.7% points from the same period last year and down 0.9% points from the first quarter this year, the federation said. Total expenses rose 11.9% year on year to 4.1tn yuan, down 6.4% points from a year earlier, the CFLP said. The expenses represented 18% of China's GDP during the same period, much higher than the ratio in most developed economies. The federation expects the sector's value to grow by 11% for the whole year, as the number of favourable factors will increase in Research4India

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fund capital expenditure, Delek Logistics said in a preliminary filing with the U.S. Securities and Exchange Commission.

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Stock Market Update

Share Price Performance

As on 20th July 2012 Container Corporation of India Blue Dart Essar Ports Ltd. Great Eastern Shipping Shipping Corporation of India Allcargo Logistics Gateway Distriparks Arshiya International Mercator Ltd. Transport Corporation of India Aegis Logistics Sical Logistics Aqua Logistics Gati SEAMEC Ltd. Varun Shipping NSE Nifty BSE Sensex ET Logistics Index ET Shipping Index Baltic Dry Index (BDIY:IND)

Market Cap (In ` mn) 117,686 46,011 41,912 39,344 26,690 18,212 15,684 7,621 4,996 4,519 4,088 3,728 3,420 3,368 2,943 2,378 -

Price (In `) 905.40 1,939.10 97.95 258.35 57.30 141.10 144.70 130.55 20.40 62.15 122.40 67.05 11.40 38.90 86.80 15.85 5,205.10 17,158.44 16,420.98 6,515.17 1,037.00

1W 1.6% -1.0% 3.2% -1.2% -4.0% 0.8% 2.8% -3.7% -5.1% -4.8% -1.0% -2.1% 9.1% -0.9% -3.7% -5.9% -0.4% -0.3% 1.1% -2.2% -6.6%

Percentage Change (%) 1M 3M 6M 5.3% 2.4% 5.7% -2.6% -10.3% 14.8% 10.1% 9.8% 69.9% 4.7% 0.7% 14.5% 8.8% -8.3% -3.5% 3.0% 12.9% 6.4% 11.4% -3.5% 8.3% -0.9% -13.5% -2.4% 14.0% -13.9% -10.3% 8.6% -2.5% -3.0% -1.1% -22.3% -24.2% -0.5% -2.9% -2.8% 24.6% -5.4% -8.4% 12.4% 7.0% 14.9% 5.3% -2.4% -5.9% 4.6% -13.9% -13.9% 1.7% -1.6% 3.1% 1.6% -1.2% 2.5% 3.7% -0.5% 5.3% -0.5% -5.4% -6.8% 6.7% -2.8% 20.3%

12M -18.6% 20.7% -2.5% -6.2% -45.0% -15.0% 12.4% -9.9% -46.4% -34.3% -45.5% -14.4% -26.0% -46.8% -23.3% -33.1% -6.5% -7.3% -15.8% -21.7% -21.9%

Baltic Dry Index

Source: Baltic Exchange

Road Freight Index

Source: Transport Corporation of India

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Financial Benchmarking
Quarterly Results Q4 FY 12, ending 31st March, 2012

Company Q4 FY11 Aegis Logistics CONCOR Shipping Corp. of Ind. Mercator Lines GE Shipping TCI Blue Dart Arshiya Essar Ports Allcargo Gati Sical Logistics Patel Integrated Varun Shipping Shreyas Shipping Aqua Logistics SEAMEC Ltd Gateway Distri. 6,917 9,954 8,651 10,549 6,016 4,790 3,370 2,344 8,264 1,895 2,287 1,983 1,062 1,330 492 1,206 280 554

Revenue Q4 FY12 15,323 10,711 10,383 10,195 8,263 4,957 4,114 3,108 2,883 2,531 2,107 1,983 1,138 804 801 786 774 492 YoY 122% 8% 20% -3% 37% 3% 22% 33% -65% 34% -8% 0% 7% -40% 63% -35% 176% -11% Q4 FY11 257 2,331 1,006 1,220 1,462 394 532 540 2,810 532 249 (371) 37 470 58 81 (210) 320

EBITDA Q4 FY12 693 2,240 (1,450) 1,156 2,418 384 447 795 2,348 609 155 206 40 592 124 56 218 245 YoY 170% -4% -244% -5% 65% -2% -16% 47% -16% 15% -38% 8% 26% 116% -31% -23% Q4 FY11 165 2,014 (62) (679) 108 128 361 194 140 391 36 (197) 16 (212) 18 36 (249) 267

PAT Q4 FY12 805 2,271 (3,559) (243) 392 112 291 277 (615) 328 81 52 4 (1,385) 63 (34) 142 164 YoY 389% 13% -64% 264% -13% -19% 43% -16% 124% -74% 257% -38%

Margins Q4 FY12 EBITDA 5% 21% 11% 29% 8% 11% 26% 81% 24% 7% 10% 4% 74% 16% 7% 50% NPM 5% 21% -2% 5% 2% 7% 9% 13% 4% 3% 0% 8% 33%

Figures in Rs.`mn Annual Results - FY12

Company FY'11 Aegis Logistics Shipping Corp. of Ind. CONCOR Mercator Lines GE Shipping TCI Blue Dart Gati Essar Ports Arshiya Allcargo Gateway Distri. Sical Logistics Patel Integrated Aqua Logistics Varun Shipping Shreyas Shipping SEAMEC Ltd 18,129 35,434 38,266 28,289 25,580 18,527 11,507 9,330 19,408 8,215 6,998 6,034 5,384 4,284 5,165 8,368 1,904 1,024

Revenue FY12 44,725 43,086 40,609 36,999 29,555 19,553 14,954 12,093 11,088 10,547 8,263 8,235 5,015 4,524 3,683 3,645 2,708 1,818 YoY 147% 22% 6% 31% 16% 6% 30% 30% -43% 28% 18% 36% -7% 6% -29% -56% 42% 78% FY'11 833 7,098 10,226 6,385 9,945 1,400 1,556 870 7,667 1,580 1,679 1,640 (45) 139 497 3,670 308 (551)

EBITDA FY12 49 4,644 10,237 5,829 10,804 1,580 1,799 988 8,910 2,701 2,481 2,504 341 166 233 888 245 94 YoY -94% -35% 0% -9% 9% 13% 16% 14% 16% 71% 48% 53% 20% -53% -76% -21% FY'11 467 5,674 8,301 468 4,687 501 947 95 702 820 1,211 968 108 32 288 147 183 (672)

PAT FY12 197 (4,282) 8,779 206 3,166 595 1,242 141 639 1,176 1,513 1,320 133 29 83 92 56 (132) YoY -58% 6% -56% -32% 19% 31% 48% -9% 43% 25% 36% 24% -8% -71% -38% -69% -

Margins FY12 EBITDA 0.1% 11% 25% 16% 37% 8% 12% 8% 80% 26% 30% 30% 4% 6% 24% 9% NPM 0.4% 22% 1% 11% 3% 8% 1% 6% 11% 18% 16% 1% 2% 3% 2% -

Figures in Rs.`mn

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