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Strictly private and confidential

Logistics Sector
Approach Note FY11
Overview of Indian Logistics Industry

Global Logistics Industry ~ USD 3.5 Tln (2008), India has small global footprint < 2% of the global industry
Overall Indian Logistics Spend is ~12-13% of GDP, while, Average in Developed Nations ~ 5-6%
Highly Fragmented - organized segment constitutes ~6% of total industry (projected to reach 12% by 2015)
Key Growth Drivers :
Rising EXIM
Emergence of Organized retail
Infra spending to GDP growth to rise from 5.0% in 2006-07 to 9.0% in 2011-12
Favorable Regulatory environment Open Sky Policy, Implementation of GST, Direct Freight Corridor, NMDP
Policy, Private Participation in Container Industry, FTWZ
Need for consolidation currently organized players largely cater to a specialized sub-segment
Outsourcing and global trade adding impetus to demand growth - Leading to emergence of Third party logistics
players (3PL) and Multimodal Transport Operators (MTO)

Logistics Industry (2008-09) INR 2.7 Trillion Logistics Industry (2013-14) INR 4.6 Trillion

11% CAGR

*Source: CRISIL, Cushman Wakefield Report 2009


Overview of Indian Logistics Industry

Indian Logistics Cost/GDP is higher than other developed economies this is a function of the prevailing Infrastructure,
regulatory framework, industry structure and historical practices followed in the industry

Globally, companies have realized that logistics can serve as an important differentiation tool and this has accelerated
the move to a more organized and integrated industry structure in India and towards a 3PL model

Indian Logistics Industry

*Source: CRISIL

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Segmental Overview

Transport and Freight Warehousing and


Segment Value Added Services
Mode Storage Mode

CFS, Warehousing, Cold


Road Trucking (Road Freight) Storage, FTWZ, Logistics LTL, FTL
Park

Rail CTO (Rail Freight) ICD, FTWZ LCL, FCL

Port Handling,
Sea Sea Freight CFS, FTWZ
C&F Agents

Tracking system, RFID,


Air Express Cargo (Courier) Air Cargo Complex Inland final delivery, door to
door delivery

3PL Third Party Logistics

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Characteristics and Relevant Products

Sub- CAGR(%) Relevant


Characteristics Key Players
Segments (2009-14P) Products
Nature: Fragmented & Unorganized TCI
EBITDA margins: 3-5% DARCL
M&A
Trucking Capex: Low 10.2
JV Patel
Drivers: Indias huge Road Network and
Budgetary allocation Roadways

Nature: Fragmented & Unorganized CWC


EBITDA margins: 10-15% M&A FCI
Warehousing Capex: Medium 9 JV
Shree
Drivers: GST, Warehousing Act PE
2007,EXIM Rajlaxmi

Nature: Organized CWC


EBITDA margins: 50-55% Concor
CFS/ICD 11.7 PE
Capex: Medium GDL
Drivers: EXIM, Infra Investments Allcargo

Nature: Fragmented & Unorganized Gati (Kausar)


EBITDA Margins:10-14% TCI (XPS Cold
10 PE
Cold Storage Capex: Medium Chain)
Drivers: Food Processing Industry, Snowman
NABARD subsidies Frozen Foods

Nature: Organized Adani


CTO EBITDA Margins:25-30% M&A Concor
16-17
(Rail Freight) Capex: High JV GDL
Drivers: GDP, EXIM, DFC Inlogistics

*Source - CRISIL

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Characteristics and Relevant Products

Sub- CAGR(%) Relevant


Characteristics Key Players
Segments (2009-14P) Products

Nature: Unorganized Allcargo


EBITDA margins: 4-7% PE Direct
Sea Freight Capex: Low 7.7 M&A Logistics
Drivers: NMDP Policy, GOI Investment in JV Aqua Logistics
Port Sector Transpole

Nature: Unorganized Blue Dart


EBITDA margins: 10-15% PE DHL
Air Freight Capex: High 20 M&A
First Flight
Drivers: Open Sky Policy, GOI JV
Deccan360
investment in Aviation sector

Nature: Unorganized GDL


EBITDA margins: 10-15% PE Aqua Logistics
3PL 27
Capex: Low JV Allcargo
Drivers: GST, FDI Sical Logistics

Arshiya Intl
Nature: Organized
M&A Apeejay Infra-
FTWZ/ EBITDA Margins:10-15%
30 JV Logistics
Logistics Park Capex: High
PE Shree
Drivers: GDP, GST
Rajlaxmi

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ISG Approach
Market Sizing & Deal flow mapping
Annual Transaction (incl. M&A, PE, IPO) value in the Logistics sector for the last 3 years is ~INR 8,000 Cr.

Assuming a 10% penetration, we estimate target market for deals to be ~INR 800 Cr. for FY11

Assuming 33% conversion into mandates, the deal pipeline for FY11 is estimated at ~INR 270 Cr.

Assuming 33% conversion of mandates into closure, the deal closure value for FY11 is estimated at ~INR 90 Cr.

Assuming 2.5% as success fee, we estimate ~INR 2.2 Cr. as revenue potential for FY11

Revenue Target Breakup (FY11)


Sector PE
M&A / JV ECM related Total
(INR Mn) Syndication

Logistics 8 3 10 21

Proposed Positioning
Focus on Mid-market clients

Companies having a topline of >INR 300 Cr. as IPO targets

Companies having a topline of INR 150 Cr. to INR 300 Cr. as PE targets

Focus on products like:

ECM related many companies in the sector have reached a size & scale for an IPO round

PE syndication given high growth trajectory of the sector, significant interest evinced by PE investors

M&A/JV few sectors are ripe for consolidation (eg, rail haulage, trucking, etc.)

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ISG Approach
Competitive Landscape
Company PE / M&A ECM
SBI Capital
ICICI Securities
IDFC Capital
Edelweiss Capital
Avendus
KPMG
E&Y
Kotak
Mape
Axis Bank
Equirus
Enam
In the Logistics space, major competition expected from the following :

PE/M&A : Avendus, Equirus, Mape, Edelweiss Capital, KPMG, E&Y

ECM : SBI Capital, ICICI Securities, Enam, Edelweiss Capital, Kotak

Differentiation Strategy
Early mover advantage & Sector credentials Aqua Logistics, Aegis Logistics, Transpole Logistics, Inlogistics, etc.

Proactively tapping niche emerging areas warehousing, air express logistics, rail haulage, cold storage, etc.

Leveraging our integrated investment banking platform (i.e., from PE to IPO cycle) vis--vis other mid-market firms
(like Mape, Equirus, KPMG, etc.)

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ISG Approach

Focus Sectors Rationale

Going forward, trend of outsourcing to organized players to increase


3PL 3PL to grow with onset of MNCs and adoption of integrated model
Low entry barriers have led to the growth of several mid-market players

GST implementation
Warehousing Demand-Supply mismatch of quality warehousing; significant investments in
greenfield projects

Air freight currently constitutes only 0.05% of overall Logistics Sector and is poised
to grow
Air Express
Several private players (Deccan 360, Kingfisher Express) have forayed into the
segment with significant investment plans

Aggressive bidding for Rail Licences by private players imply longer payback
Rail Freight / ICD periods which is becoming unsustainable for several bidders
Segment is expected to witness significant consolidation in the near future

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ISG Approach
Logistics Mandates & Pipeline
Transpole Logistics Raising PE of upto INR 60 crs

Aegis Logistics Enhancing shareholder value exercise, leading to QIP issue of upto INR 100 crs.

DARCL Raising equity through IPO of upto INR 130 crs

Direct Logistics Raising PE of upto INR 40 crs

Indo Arya Logistics Raising equity through IPO of upto INR 150 crs

Business Development
Mapped a list of 50-60 companies, alongwith their growth plans and potential opportunity for Centrum

Tapping Public domains and subscribed databases

Mergermarkets

Crisil

Projects Today

Leveraging networks, i.e., Centrum fraternity and industry associates (CAs, advisors)

Proposed client interface approach:

Meetings atleast 2-3 prospective clients every fortnight

Meetings atleast 2-3 investors every fortnight

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Select Opportunity Mapping

Company Business Segments Current Scenario Potential Opportunities

Raised USD 23.5 Mn through a QIP


issue
MTO, 3PL, Freight
Allcargo Logistics M&A
Forwarding Company is looking for acquisition
opportunities in India and US
(June 2010)

JV with Toronto based Spire group


Warehousing, Freight in 2008 .Looking to form more JVs
Fwd (VAS), Container
Apollo Logisolutions Partner search, PE, IPO
Transportation, Multi- To invest 1300 Cr to setup CFSs
modal Transporter and ICDs over next 5 years
(July 2010)

Plans to invest Rs. 2500 Cr to set up


5 FTWZs
Warehousing, FTWZ,
Arshiya International Looking for acquisitions in Rail PE, M&A
CTO, Freight Fwd
freight space
(June 2010)

Planning to spend Rs 100 - 150 Cr


for small-ticket acquisitions to
Blue Dart Express Express services M&A
increase hinterland presence
(March 2010)

Planning an IPO offering of ~ Rs


Delhi Assam Road freight, CTO,
130 Cr IPO
Roadways Corp Liquid Transport
(March 2010)

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Select Opportunity Mapping

Company Business Segments Current Scenario Potential Opportunities

Promoter divested of the majority


stake in 2009 in the Holdco RKHS.
Though RK Foodland was not part
of negotiations.
Supply Chain
RK Foodland M&A
Management Group is also exiting its other JVs

Promoter may eventually sell out RK


Foodland
(March 2009)

Company to look for acquisitions in


2010
Safexpress Express services PE, M&A,IPO
To invest Rs. 1,000 Cr in expansion
(July 2008)

Planned an IPO in 2009, but it was


Express Cargo, Parcel put off due to adverse market
DRS Group IPO
movers, Relocation conditions
(May 2010)

Planning investments upto Rs. 350-


400 Cr
Srivari Group FTWZ PE
Plans to set up an FTWZ in Ennore,
Chennai

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Recent Deals

Relevant
Sub-Segments Recent Deals
Products

Toll Holding acquired 40% stake in BIC Logistics with option of acquiring
M&A
Trucking majority stake in 2 years (05/09)
JV
ICICI acquired Transafes 50% stake in JV with Balmer Lawrie (09/09)

LTL/FTL PE/PIPE AFL Logistics acquired Unifreight for INR 55 crs (08/08)

M&A
Ambit Pragma acquired over 30% in Spear Logistics , which deals in contract
Warehousing JV
warehousing, for INR 25-50crs
PE/PIPE

Temasek acquired a 10% stake in GDL(06/04) which later had an IPO (03/05)
CFS / ICD PE/PIPE
Blackstone invested INR 320 crs in 11/09

Gati acquired additional 26% stake in Kausar India to raise stake to 99.73%
Cold Storage PE/PIPE (04/09)
IFC invested INR 25 crs in Snowman Frozen Foods

M&A
Eredene Capital invested INR 42 crs in Apeejay Infra Logistics to develop
FTWZ & Logistics Park JV
Logistics Park in Haldia, WB (06/07)
PE

M&A India Value Fund acquired 51% stake in Inlogistics for INR 200 crs (04/09)
CTO (Rail freight)
JV

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Recent Deals

Relevant
Sub-Segments Recent Deals
Products

PE/PIPE
Sea Freight NYK acquired 26% stake in TMIL for (03/10)
M&A

PE/PIPE PSA International acquired Sicals 27% stake to assume full


Allied Port activities
M&A ownership of Chennai International Terminal

RIL acquired majority stake in Deccan 360 for INR 100-150 crs
PE
(04/10)
Air freight M&A
Geopost Intercontinental acquired 60% of Continental Air Express for
JV
INR 5 crs (01/08)

PE/PIPE Hitachi acquired Flyjac Logistics for INR 250 crs (03/10)
Multimodal Freight
M&A TCI acquired RILs stake in Infinite Logistics for INR 1 cr (03/10)
Forwarding
JV New Vernon invested INR 60crs in Allcargo for 6% (01/06)

PE/PIPE TVS Logistics acquired Multipart Holdings for INR (11/09)


Supply Chain
M&A ChrysCapital invested INR 75 crs for 11.1% stake in Redington India
Management
JV (03/06) which later had an IPO (02/07)

PE/PIPE Aqua Logistics acquired AGI Logistics, CIT Logistics and TAG
3PL M&A Logistics (03/10)
JV SIDBI VC invested INR 10crs in Direct Logistics (03/06)

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Thank You

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