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COMPANY- Container Corporation of

India

Container Corporation of India Ltd. (CONCOR), is a Navratna Public


sector undertaking under the Indian Ministry of Railways. Incorporated in
March 1988 under the Companies Act, CONCOR commenced
operations in November 1989 taking over an existing network of seven
inland container depots (ICDs) from Indian Railways. It now has a
network of 68 ICDs/CFSs (Container Freight Stations) throughout India.

Indian Railway's strategic initiative to containerise cargo transport put


India on the intermodal freight transport map for the first time in 1966.
Given India's size (almost 3,000 kilometres (1,900 mi) from North to
South and East to West), rail transport is often a cheaper option for all
cargo over medium and long distances, especially if the cost o inter-
modal transfers can be reduced. Seeing that containerised multi-modal
door-to-door transport provided a solution to this problem, in 1966 Indian
Railways entered the market for moving door-to-door domestic cargo in
special DSO containers.
Although the first ISO container in India had been handled in Kochi as
early as 1973, it was not until 1981 that the first ISO container was
moved inland by Indian Railways to the country's first ICD at Bangalore,
also managed by the Indian Railways.
Expansion of the network to seven ICDs by 1988 saw an increase in
container handling capacity, while along the way a strong view emerged
that there was a need to set up a separate pro-active organisation to
promote and manage the growth of containerisation in India.

Core Business
CONCOR operates three core businesses: cargo
carrier; terminal operator, warehouse operator & MMLP operation.

PRESENT SCENARIO
2012’
by Knowledge Resource Development & Welfare Group (KRDWG) for
Excellence in Application of MIS in Industry.
2013
-Container Corporation of India Ltd has declared a Final Dividend of
Rs. 9.50 (95%) per equity share of face value of Rs. 10/- each.
-Container Corporation of India has announces bonus in the ratio of
1:2

2014
-Container Corporation of India Ltd has declared a Final Dividend of
Rs. 5.30 (53%) per equity share of face value of Rs. 10/- each .

2015
-Container Corporation of India Ltd (CCI) has sanctioned setting up
of two new Multi Modal Logistics Parks (MMLPs) at Tehi in Madhya
Pradesh and Barhi in Haryana.
-Container Corporation of India Ltd selected as the winner for the
Most Efficient Miniratna of the
year- Non-Manufacturing by Dalal Street Investment Journal (DSIJ),
organized the PSU Awards 2014
-Container Corporation of India limited signed the Memorandum of
Understanding with
Ministry of Railways, for setting out various physical and financial
targets for FY 2015-16
-Container Corporation of India - Inauguration of CONCOR’s Perishable
Cargo Centre (PCC) by Railway Minister

ROAD AHEAD
The mission of the Company is to join its community partners and stake
holders to make CONCOR a Company of outstanding quality. To provide
responsive, cost effective, efficient and reliable logistics solutions to its
customers through synergy with community partners and ensuring
profitability and growth.

To be the first choice for our customers, the Company remains firmly
committed to its social responsibility and prove worthy of trust reposed in
it.
The ₹ 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.

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.

Net Sales

The Net Sales for the year 2012-13 is 4,200(rs in crores) and that in the
year 2016-17 is 5,600(rs in crores). This shows there was an increase of
around 33.33% (approx.)
Working Capital Management
Working Capital management is also known as short-term financial
management. It is investment in various components of current assets
by financing through current liabilities. Financing Plans for Working
Capital are
1. Long term financing: The long-term financing is obtained for a period
of more than a year. The sources of long-term financing include equity
share capital, preference share capital, and debentures, term loans from
financial institutions etc.
2. Short-term financing: The short-term financing is obtained for a
period of one year or less. Short-term finances include public deposits,
commercial paper, factoring account receivables.

Serial Year 2016-17 2015-16 2014-15 2013-14 2012-13


no. (in Rs. Cr) (in Rs. Cr) (in Rs. Cr) (in Rs. Cr) (in Rs. Cr)
1 Current 1,208.87 1,064.60 3427.67 3331.89 3484.24
Asset
2 Fixed 3,876.92 3824.49 3542.46 3240.77 2908.38
Asset
3 Total 9,931.57 9188.42 8689.91 8068.78 7250.67
Asset
4 Current 766.77 802.85 790.52 734.07 655.19
Liabilities
5 PBIT 1,180.61 1061.60 1294.57 1284.25 1212.08

6 Rate Of 0.118874 0.115536 0.148973 0.159162 0.167167


Return
(PBIT/TA)
7 Net 442.1 261.75 2637.15 2597.82 2829.05
Working
Capital
(CA-CL)
8 Current 1.58 1.33 4.34 4.54 5.32
Ratio
(CA/CL)
9 Quick 1.55 1.30 4.31 4.52 5.30
Ratio
Depending on the mix of short and long-term financing, a company can
follow the following approaches –

1. Matching Approach /Hedging Approach: This approach calls to match


the duration of the assets with the funding size. The justification for the
exact matching is that, since the purpose of financing is to pay for assets
so the source of financing and the asset should be relinquished
simultaneously. When the firm follows a matching approach, long-term
financing will be used to finance fixed assets and permanent current
assets and short-term financing to finance temporary or variable current
assets. Under a matching plan, no short-term financing will be used if
the firm has a fixed current assets need only.

2. Conservative Approach: A firm in practice may adopt a conservative


approach in financing its current and fixed assets. The financing policy of
the firm is said to be conservative when it depends more on long-term
funds for financing needs. Under a conservative plan, the firm finances
its permanent assets and also a part of temporary current assets with
long-term financing. The conservative plan relies heavily on long-term
financing and, therefore, the firm has less risk of facing the problem of
shortage of funds. Here idle Long Term Finances are invested in market
securities.

3. Aggressive Approach: A firm may be aggressive in financing its


assets.
An aggressive policy is said to be followed by the firm when it uses more
short-term financing than warranted by the matching plan. Under an
aggressive policy, the firm finances a part of its permanent current
assets with short-term financing. Some extremely aggressive firms may
even finance a part of their fixed assets with short-term financing. The
relatively large use of short-term financing makes the firm more risky.

We can see that the company has –


 Adequate level of Net Working Capital for the year 2012-13 is
2829.05. It fell to 442.1 in 2016-17 but is still positive.
 The level of Current Assets is low which means that the company
is using an aggressive approach, though the levels of current ratio
seems to be fine, the company is using high level of risk still it has
resulted in increasing returns in comparison to the previous year.
 The company needs to follow Matching Approach so as to obtain
optimum current ratio by increasing its current assets.
Short-Term Finance and Planning
Year Inventory Receivable Operating Payable Cash
Days days Cycle Days Cycle(-)
2016-17 1.46 3.1 4.56 20.7 16.14
2015-16 1.12 2.8 3.92 17.5 13.58
2014-15 1.10 2.5 3.6 18.7 15.1
2013-14 1.09 2.4 3.49 18.5 15.01
2012-13 1.00 2.1 3.1 17.9 14.8

Inventory Days - Inventory days tells how long company holds


inventory before selling it which is around 1.46 days for Container corp.

Inventory Turnover = COGS/ Avg. Inventory


Inventory Days = 365 days/ Inventory turnover

Account Receivable Days - Account Receivable days shows how long


it takes company to collect its outstanding account receivables which is
around 3.1 days.
Receivables Turnover = Credit sales/ Avg. Account Receivables
Receivables Days = 365 days/ Receivables Turnover
Account Payable Days - Account Payable Period tells us how long it
takes company to pay its suppliers for Container Corp it is 20.7 days,
which tells company pay backs its suppliers before getting cash for the
prepared inventory.
Payables turnover = COGS/ Average payables
Payables Days = 365 days/ Payables Turnover
Operating Cycle - Operating cycle is average time between receipt of
raw material and receipt of cash of finished goods made from those
materials which is around 4.56 days. There has been significant
increase in operating cycle as compare to 2012-13 showing increase of
around 47.09% that shows that the time lag between the receipt of raw
material and receipt of cash of finished goods has increased.
Operating Cycle = Inventory Period + Accounts Receivables
Cash Cycle - Cash cycle is the time between the Cash outflow for
material and cash inflow from sales which is around (-)16.14 days for
Container Corp. this means company does not need funds that need to
depend on short term and long term financing for funding.
Cash Cycle = Operating Cycle - Accounts Payable Days
25

20

15

10

0
Inventory Days Receivable days Operating Cycle Payable Days Cash Cycle(-)

2016-17 2015-16 2014-15 2013-14 2012-13


Financial Distress
Year Current Non- Current Non- Operating
Asset Current Liability Current cash flow
Liability Asset
2016-17 1208.87 318.60 766.77 8722.70 589.07
2015-16 1064.60 279.74 802.85 8123.28 669.25
2014-15 3427.67 263.70 790.52 5262.24 1106.44
2013-14 3331.89 349.40 734.07 4736.89 764.49
2012-13 3484.24 314.35 655.19 3766.43 919.57

Financial Distress can be understood from the following –

 As we can see the cash flow from operating activities is positive


and the company is earning healthy profits, the company is in a
healthy situation, though the operating cash flow ratio is less than
one but in the recent financial year it is showing signs of increase.
 The company has a balanced capital structure and healthy
interest coverage ratio

Year Interest Coverage Total Debt\Equity


Ratio(times) (times)
2017 323.238 0.000
2016 8725.400 0.000
2015 - 0.000
2014 - 0.000
2013 - 0.002
2012 - 0.006

It can be seen from above table that the debt to equity is continuously
decreasing from 0.006 in 2012 to 0.000 in 2017 and the operating cash
flow is also increasing steadily over the years, so we can say that the
company is not under any financial distress. Non-current assets are
sufficient to cover non – current liabilities.
It is safe to conclude that the company is growing and there are no signs
of Financial Distress.

Mergers & Acquisition


Mergers and acquisitions (M&A) is a general term that refers to
the consolidation of companies or assets. M&A can include a number of
different transactions, such as mergers, acquisitions, consolidations,
tender offers, purchase of assets and management acquisitions. In all
cases, two companies are involved. The term M&A also refers to the
department at financial institutions that deals with mergers and
acquisitions.

Container Corp quotes that “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.”