For logistics companies, tracks are good.
Players like Gateway Distriparks, Arshiya International, Hind Terminals and Boxtrans are currently expanding their rail segments to ready themselves for the expected boom in the sector. With the rail mode accounting for close to 30% of the total traffic, companies are eyeing a bigger piece of this pie.
Industry experts said while Concor still holds monopoly for the rail freight segment, private players are expanding this capacities here so that they can be ready for full operations by the time the dedicated freight corridor (DFC) comes up in 2014.
Sankalp Shukla, chief operating officer and MD of Inlogistics, said: “Current expansion will help in faster movement later as the DFC will provide high speed corridor for these players.”
“With the freight corridor coming up, these players need to be ready with their rakes, containers, sidings, warehousing to have faster movement of cargo. Expanding now will give them a jumpstart on this process,” an analyst said.
Manoj Mohta, head-research, Crisil, told DNA that the rail segment is expected to grow by 16-17% CAGR in the next 4-5 years. “Currently, the containerised segment stands at Rs 3,500-4,000 crore and is expected to reach Rs 8,500 crore in the next 4-5 years,” he said.
The companies have invested heavily. Arshiya International has invested Rs 2,210 crore in the first phase of an expansion plan which included setting up free warehousing trade zones and strengthening its rail network.
“We will invest Rs 10,000-12,000 crore in the next 5-7 years in the rail segment to meet the rising demand of the same,” said Ajay Mittal, chairman and MD, Arshiya International.
Gateway Rail Freight Ltd (GRFL), a subsidiary of Gateway Distriparks, is raising Rs 300 crore through a deal with the Blackstone Group to expand operations.
In a recent report by IDFC-SSKI, analyst Bhoomika Nair wrote: “While the number of operators appears high at 16, we believe there are enough volumes. With 500 rakes expected to be operational by FY12/13, players are eyeing only 3% (97 million tonnes) of the overall freight market. However, volumes are required to be shifted from road to rail, for which operators have to offer timely, reliable and value-added services with last-mile connectivity and customised solutions.”
Nair wrote that most companies are expanding keeping in view the reduction in delivery time and costs that the rail routes will bring in. “Our analysis reveals that over a distance of 1,000 km, freight costs are lower 20-25% for cargo transported via the rail route,” Nair wrote.
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