2. 2
Acknowledgement
“It is not possible to prepare a project report without the assistance &
encouragement of other people. This one is certainly no exception.”
On the very outset of this report, I would like to extend my sincere & heartfelt
obligation towards all the personages who have helped me in this endeavor.
Without their active guidance, help, cooperation & encouragement, I would not
have made headway in the project.
I am ineffably indebted to TAMAL DATTA CHAUDHRI for conscientious
guidance and encouragement to accomplish this assignment.
I am extremely thankful and pay my gratitude to my faculty TAMAL DATTA
CHAUDHRI for his valuable guidance and support on completion of this project
in it’s presently.
I extend my gratitude to CALCUTTA BUSINESS SCHOOL for giving me this
opportunity.
I also acknowledge with a deep sense of reverence, my gratitude towards my
parents and member of my family, who has always supported me morally as
well as economically.
At last but not least gratitude goes to all of my friends who directly or indirectly
helped me to complete this project report.
Any omission in this brief acknowledgement does not mean lack of gratitude.
Thanking You
AVINIT KUMAR
3. 3
CONTENT
Sl.no Particulars Pg.no
1 COMPANY PROFILE
2 PRODUCT & SERVICES
3 THE LOGISTICS OUTSOURCING CONTINUUM
4 STRUCTURE OF THE LOGISTICS INDUSTRY
5 INDUSTRY PERFORMANCE
6 MISSION & VISION
7 EXECUTIVE SUMMARY OF SICAL LOGISTIC
8 INDIAN LOGISTICS INDUSTRY
9 PROMOTER
10 GOVERNMENT INITIATIVE IN THE LOGISTIC
SECTOR
11 KEY CHALLENGES OF SICAL LOGISTICS
12 SICAL’S EXPERTISE:
13 MAJOR PLAYERS IN LOGISTICS SEGMENT
14 LOGISTICS SEGMENT
15 PORTER'S FIVE FORCE MODEL
16 MAJOR CLIENT
17 CUSTOMER PROFILE
18
KEY RATIOS AND RATIO ANALYSIS
19
COMPETITOR
20 (COST OF EQUITY
21
RRE
22 STOCK PRICE VARIATION
23 STOCK PRICE COMPARISION AND ANALYSIS
24 CREDIT RISK ASSESSMENT
25 PROJECT AND PLAN IN FUTURE
26 ACHIEVEMENTS
27 AWARDS
28 CONCLUSION
Company Profile
4. 4
Sical Logistics Ltd is India's leading provider of integrated solutions for offshore
logistics and multi-modal logistics for bulk and containerized cargo. The company is
the handler of more than 26 million tons of bulk group cargo and 500,000 TEUs of
containerized cargo annually. The company owns and operates a container terminal at
Tuticorin in joint venture with the Port of Singapore Authority, which is engaged in
ports and terminals business. The company provides end-to-end solutions in Bulk
Logistics-stevedoring, which includes port terminals, customs house and shipping
agency, trucking, railroad and warehousing; Container logistics, which includes
container terminals, ICD and CFS; and Offshore Logistics, which includes platform
supply vessel and cutter suction dredger. Sical Logistics Ltd was incorporated in the
year 1955 as a private limited company with the name South India Corporation
Agencies Ltd. In the year 1972, the company incorporated Agro Cargo Transport to
provide trucking services to group companies. Also, they established the Ship Repair
Division with their base at Chennai. In the year 1988, the company diversified in the
area of fabrication and building of steel barges electro hydraulic grabs pay-loader
buckets and survey launches. In the year 1989, the Ship Repair Division undertook
fabrication of floating platform storage tanks as sub-contractors for Chokkani
International Ltd. In the year 1996, Agro Cargo Transport merged with the company,
which is currently operating as Sical's trucking division. In July 1998, the company
signed a joint venture agreement with PSA India Pte Ltd, Singapore and Nur
Investments and Trading Pte Ltd for development management and operation of the
seventh berth at Tuticorin as a full-fledged container terminal on BOT basis. In the
year 1999, MAC Agro Industries Ltd was amalgamated with the company. Also, the
company won a major long-term coal handling contract on BOT basis from Tamil
Nadu Electricity Board for the new port at Ennore. In the year 2000, the company
entered into a joint venture agreement with Coeclerici Logistics, Italy and formed a
50:50 company, namely SICAL Coeclerici Logistics Ltd. In addition, the company
hived off their profit making auto components division to a joint venture company.
During the year 2004-05, the company added new business lines in their port
handling and trucking divisions. In November 2005, the company hived off non-core
business to focus mainly on logistics business. In February 2006, they incorporated
MAC Oil Palm Ltd to focus on the palm oil business. The company made an
application to the Indian Railways to operate container trains on an all-India license
for export-import and domestic cargo including all the four categories offered by the
Indian Railways. The company changed their name form South India Corporation
(Agencies) Ltd to Sical Logistics Ltd with effect from February 14, 2006. In April
2006, the Maharashtra Airport Development Company issued the letter of intent to
the company for setting up a rail terminal as part of the proposed Multi-modal
International Hub Airport at Nagpur During the year 2006-07, the company formed a
special purpose vehicle, namely Nagpur Sical Gupto Logistics Ltd for the road
terminal at MIHAN. For the road terminal at MIHAN, a special purpose vehicle,
Nagpur Sical Gupta Road Terminal Ltd, was formed with Sical as the lead
consortium partner with 51% stake; the state-run MADC owns 26% of equity for
contributing land towards the project. The company transferred their oil palm
undertaking to their wholly owned subsidiary Mac Oil Palm Ltd through a Scheme of
5. 5
Arrangement. In addition, they sold their refractory division and executed the
Business Transfer Agreements for their cytozyme and flexible shafts. In September
2006, the company acquired Singapore-based Bergen Offshore Logistics Pte Ltd, a
provider of specialized logistics for offshore oil and gas exploration. During the year
2007-08, the company hived off their trading, services and coffee plantation
undertakings to Sicagen India Ltd with effect from October 1, 2006. In addition, the
company transferred the shareholding in Sical Distriparks Ltd to Sical Infra Assets
Ltd. In August 2007, they acquired cutter suction dredger, which is currently
operating in China. In August 2007, the company sold their manufacturing facilities
and assets of their auto components division, Indrad Auto Components, to Lucas
TVS Ltd for Rs 14.69 crore. In March 2008, the company's first container train
flagged off at Hatta Road station in Madhya Pradesh. The company was awarded the
Best Business Partner Award for having handled the highest volume of cargo at
Chennai Port during the financial year 2007-08. Also, the company was selected as
the Organisation of Excellence in Traffic Performance for the year 2007-08 by the
Tuticorin Port Trust. The company was awarded the Best Stevedorer for the year
2008-09 for handling highest volume of coal at Ennore Port. In August 2008, the
company initiated the operations of their second container train from Melpakkam rail
terminal; 70 km form Chennai to a private rail sliding at Patil, near Gurgaon. In
February 2009, the company signed a strategic partnership with MMTC Ltd for their
Greenfield iron ore terminal project at Ennore Port. In April 2009, the company
signed Business Transfer Agreement for transfer of their drums division to Sicagen
India Ltd effective from April 01, 2009. In May 2009, the company signed a MoU
with Mitsui OSK Lines Ltd for the launch of a joint venture to operate a completed
car yard at Ennore Port near Chennai. The joint venture will be engaged in yard
operations such as storage and preparation for loading of vehicles at the export port,
of all operations for exports of Nissan vehicles, for which MOL has already secured a
contract.
6. 6
Products & Services
Product Name % of Stock Sales (Cr.)
Port Services Income 68.7 343.27
Transportation 28.9 144.24
Other Services 2.5
12.47
Finished Goods
Product Name Value (Rs.Cr) % Sales Turnover
Other Services 12.47 2.49
Transportation 144.24 28.85
Port Services Income 343.27 68.66
The logistics outsourcing continuum
7. 7
Figure 1 demonstrates, however, there is a wide range of intermediate positions
offering varying combinations of internal and external provision. In real terms, the
two extreme positions are quite rare, with most large firms seeking to strike a balance
of internal and external provision for strategic reasons. Importantly, however, by far
the dominant trend is for increased outsourcing. It was estimated in the mid-2000s
that only 5 percent of the global logistics industry was outsourced (2008). This figure,
however, varies significantly from market to market, ranging from 2 percent in China
up to 40 percent in the UK in the mid-2000s, with the figures for France, Germany,
the US and Europe as a whole being 22, 28, 19 and 25 percent, respectively. In
dynamic terms, however, the third-party logistics market is growing rapidly in most
territories: in China, for example, the outsourced logistics market was estimated to be
growing at 30 percent per year in the late 2000s
The logistics outsourcing continuum (Fig 1)
8. 8
Structure of the logistics industry
General arguments about the nature and growing significance of logistics need to be
accompanied by recognition that logistics services are hugely variable across, time,
space and GPNs, and are provided by a rich array of inter-linked corporate actors. We
can develop these arguments in five stages. The first point to make is that the inherent
nature of logistics systems has changed dramatically in recent decades (see Figure 2
for a stylized version). One shorthand way of describing this broad shift is from
inventory-based, or ‘push’, logistics to replenishment-based, or ‘pull’, logistics. In
‘traditional’ arrangements of the goods flow within GPNs (top half of Figure 2), there
was a storage function acting as a buffer between raw materials suppliers and
manufacturers, with a similar inventory-based warehouse on the customer side.
Delays were common at all stages, leading to inventory accumulation at the various
storage points. In contemporary ‘demand-pull’ logistics systems, by contrast, many of
these costly storage facilities are eliminated (bottom half of Figure 2). Reverse flows
– associated with product returns and recycling – are part of the system, and
warehousing is kept to a minimum, usually in the form of a distribution center that is
throughput-oriented excellent overview of the role of retail capital in driving many of
these changes). While these reduced inventory systems are generally characterized as
being lean, some commentators have contrasted lean supply networks – with an
emphasis on efficiency and predictability of supply of relatively standardized
commodities – with the emergence of agile networks wherein the imperative is rapid
response to shifts in market demand for fashion goods
The changing nature of logistics requirements (Fig-2)
9. 9
The changing nature of knowledge flows within supply networks
Figure provides a useful grid for conceptualizing the different diversification
strategies individual firms may pursue. On the one hand, they may seek to enhance
the range of asset-based services they provide, developing basic transport and
warehousing services into more sophisticated SCM and DC operations. On the other
hand, they may seek to develop the level of non-asset-based management services
they offer.
10. 10
As a result of these ongoing diversification processes – and although the empirical
evidence is somewhat patchy and anecdotal – it is clear that the range of services
offered by some providers now goes well beyond those offered by traditional 3PL
firms including:
• Manufacturing support: undertaking or supporting sourcing, managing
procurement, completing light manufacturing and assembly activities;
• Origin management: managing vendors, purchase orders, in-country
collections, order consolidation;
• Freight management: managing and coordinating global freight movements
across all major modes of transport;
• Destination management: managing downstream operations, port to DC
delivery, deconsolidation, customs brokerage, demurrage, quality checking;
• Contract distribution: storage and delivery, inventory management, DC
management, pre-retailing (labelling etc.), reverse logistics, retail delivery,
home delivery.
11. 11
More specific growth areas include
• Transnational supply chain coordination: the integration of contract logistics
activities at both source and destination into end-to-end supply chain solutions;
• Reverse logistics: handling the inherently complex and inefficient processes of
good returns from customers. Estimated to be a global market worth US$35
billion in the mid-2000s;
Packaging: by outsourcing packaging, enables client firms to gain efficiencies by
decoupling product manufacture from packaging for specific markets (and also
customized marketing initiatives and product combinations);
• Service parts logistics: found particularly in high-tech sectors, an involving
ensuring post-sales high-value or critical parts reach a spatially extensive
customer base quickly and efficiently;
• Inbound to manufacturing (I2M): the SCM of the inbound flow of materials
from suppliers to the point of production.
Having offered a broad overview of the changing market and organizational,
technological and regulatory characteristics in this section, in the next two sections
we look in more detail at economic and social upgrading within the logistics industry.
14. 14
Vision
Become a leader in the industry known for
pioneering solutions in logistics, worldwide.
Mission
"To be the most Reliable, Trusted and Preferred
logistics partner across Business, providing Cost
Effective, Innovative and Best-Fit solutions for
customers, ultimately enhancing value for its all
Stakeholders".
15. 15
Executive Summary of SICAL Logistic
The logistics sector in India is evolving rapidly and its growth is dominated
by the interplay of infrastructure, technology and new types of service
providers that will determine whether the industry is able to help its
customers to reduce logistics costs and provide effective services or not
Changing government policies on taxation and regulation of service
providers is going to play an important role in this process
The logistics sector has attracted a large amount of investment in the past
years and in future the sector could witness the same due to rising demand
for logistics driven by industries like automobile, retail, pharma etc.
There is significant rise in the demand for third party logistics providers in
the sector as well, which is led by TVS Logistics today and has few capable
competitor
The sector provides lucrative business opportunities today for new players
in terms of margins, low-entry barriers and high growth prospects
Proper infrastructure support by the government and competition from the
unorganized sector are major challenges in the growth of the logistics sector
16. 16
Indian Logistics Industry
The Logistics industry includes five broad segments – ocean freight, rail
freight, air freight, trucking and third party Logistics (3PL) services
The current size of the Indian Logistics Industry is estimated around $225bn
and is expected to reach around $350bn by 2015
As per industry estimates as provided by the Fitch Rating Agency, there is a
positive future outlook for the Indian Logistics Industry and it is estimated
that the industry will grow at 15-20% over the next few years
Several factors helped the growth of logistics industry in India over the last
decade that include changing tax system as well as a rapid growth in
industries such as automobile, pharmaceuticals, FMCG and retail
70% of the total domestic product is transported through the road network
and 15% through the rail network. Domestic companies are willing to
expand their efficiency to meet rising demand globally according to a study
by industry body ASSOCHAM
Logistics costs in India are estimated to be approximately 13% of GDP
which is considerably high when compared to the corresponding figures for
other major economies of the world (as per World Bank 2010 report). For
example in 2011 the logistics costs in the European Countries accounted for
7.15% of GDP (as per an article in ‘The Hindu’)
Higher logistics costs are mainly due to poor infrastructure facilities in the
country. The higher logistics cost represents higher products/services cost in
the international market
The country’s organized logistics market represents 6% of the total market
17. 17
The three major contributors for the growth of logistics industry are:
emergence of organized retail, increase in foreign trade and India becoming
a global manufacturing hub
Growth in the logistics industry depends on infrastructure availability and
involvement of private players and increased government spending which will
catalyze the growth in the industry
Backed by strong economic fundamentals, the Indian Logistics Industry is
slated for a 15% CAGR to size up to USD $350bn by 2015
Key Trends in the Indian Logistics Industry
Rising investment in the rail and port spaces also fuels growth in allied
industries like wagon manufacturing, port handling equipment, railway
electrification systems and construction companies
3PL Services: Logistics services like transportation, warehousing, cross
docking, inventory management, packing and freight forwarding are all part
of third party logistics services. Companies in India currently outsource an
estimated 52% of logistics, and 3PL represents only 1% of logistics cost. As
of now, the 3PL activity is limited to only few industries like automotive, IT
hardware, telecom and infrastructure equipment
Global Players: The industry is becoming more competent with entry of
global giants like Gazeley Broekman (Walmart’s Logistics partner), CH
Robinson and Kerry logistics and large Indian Corporate houses like Tata,
Reliance and
Bharti group. A series of mergers and acquisitions like DHL acquiring Blue
18. 18
Dart, TNT acquiring Speedage Express Cargo Service and Fedex buying
over Pafex, are also leading to consolidation of the industry at various levels
and segments
Express Logistics: Organized players have a monopoly over the express
logistics industry. 65% of express business is in the hands of organized
players, while semi-organized and unorganized players account for 25% and
then the remaining 10% of the market by EMS Speed Post. On the domestic
front, unorganized players hold 41% of the market share based on price
advantage and organized players account for 45% and EMS Speed Post the
remaining 14%
Warehouses: Warehouses have become key growth drivers in the logistics
industry. Warehousing does not only provide conventional storing services,
but also provides value-added services like consolidation and breaking up of
cargo, packaging, labeling, bar coding and reverse logistics etc.
Warehousing and related activities account for approximately 20% of total
logistics industry and as per KPMG, an additional 120million square feet of
warehousing space is needed in 2012 to meet demand gap in storage space.
Our view is that Warehousing will see a lot of investment in the coming
years
Logistics Parks: About 110 logistics parks spread over approximately 3,500
acres at an estimated cost of $1bn are expected to be operational and an
estimated 45mn sq.ft of warehousing space with an investment of $500mn is
expected to be developed by various logistics suppliers in the coming year.
Majority of these logistics parks are planned in close proximity to state
capitals. However, availability of large land parcels at relatively low cost,
19. 19
connectivity to multiple markets across states and industrial clusters has led
to the emergence of some Tier 2 and Tier 3 cities as favored destinations for
the development of logistics parks and warehouses
To reduce the transportation cost and for quicker movement of cargo,
Multimodal transport operation (MTO) is introduced which helps exporters
with less documentation (for instance single document for all modes of
transport)
Promoter
Mr. V.G. Siddhartha: Entrepreneur
Mr. V.G. Siddhartha is the promoter of the Coffee Day Group. His family has
been in the coffee growing business for more than 130 years. Coffee Day
Group owns 11,000 acres of coffee plantations.
He was the first entrepreneur to set up a cyber cafe in the state of Karnataka, in
1996 (Cafe Coffee Day, a chain of youth hangout coffee parlors). At present,
the Group holds 1400+ Coffee Day Cafes in India.
Coffee Day group is one of India’s fastest growing business conglomerates
with interests ranging from:
o Retail Distribution of Coffee in Various Formats
o IT Technology Parks ( SEZ & STPI )
o Financial Services
o Investments in Technology & Software Companies
o Agri-Businesses
o Commodity Exports
o Luxury Resorts
o Logistics – Port, Rail, Road & Offshore Services
o Furniture Manufacturing
20. 20
Coffee Day Group acquired Sical in September, 2011 and expanded their scope
in logistics business.
Sical Logistics ltd. is India’s leading integrated logistics solution provider for
bulk and containerized cargo. It is the single point for end to end supply chain
needs across businesses.
Coffee Day Group’s vision is to transform Sical into a high performance
organization, with specific focus on delivering value to the customer.
Government Initiative in the Logistic Sector
To emphasis the significance of government initiatives in the logistics
industry and to increase the competence in the sector the government has
introduced private sector participation, especially in the port sector
The major initiative in transport infrastructure is an introduction of National
Maritime Development Program (NMDP) with an investment of Rs 568bn.
NMDP would be addressing the challenges of the growing international
traffic demand of the country along with developing the port facilities at par
with world class standards
In order to liberalize the railway services, the government opened its doors
of container business to private parties
The Government has removed the differential state-level taxes that were
causing higher unit and inventory carrying costs, and introduced uniform
Goods and Services Tax (GST) to reorganize warehousing system in India
FDI Regulations: In general 100% FDI under the automatic route is
permitted for all logistics services
21. 21
SICAL Logistics: Key Challenges
Geographical Coverage Insufficient: Insufficient distribution
channels/infrastructure bottlenecks restrict the scope to reach consumers of
products nationwide
Over-burdened ports: India has a long coastline. However, the country’s port
system isn’t utilized properly. 70% of the seaborne trade is managed by 2-3 of
its 12 major ports. Remaining 185 minor ports in the country are largely
underutilized
Warehousing investment is low: The infrastructure including roads, airports and
seaports are preliminary the main target areas of investment. However,
warehousing, a facilitator for the agricultural sector, has attracted lower investment
that reduced its pace of growth in comparison to rising farm output
Technology Usage: Technology usage is still very low in India, which restricts the
scope of increasing efficiency and productivity
Cost/Quality of Service: According to industry analysts, logistics costs in India
are among the world’s highest and outside of the metros and a few cities, the
delivery time is very uncertain
Overburdened physical infrastructure is a major bottleneck currently
faced by the Indian Logistics and Transportation players
22. 22
SICAL’s Expertise:
Sical is a leading logistics company with a strong presence in the Indian
subcontinent and complete in-house infrastructure. Sical is capable of seamlessly
moving millions of tons to number of locations with zero error. To optimize
control and minimize costs Sical logistics is well designed and is adequately
supported with port, road and rail frameworks.
Leveraging Expertise:
Sical offers its valuable solutions and expertise to wide range of diverse industries
like Steel, Infrastructure, Building & Construction, Shipping, Import & Export,
Chemical and Fertilizer industry. Logistic solutions are custom made to suit
specific client needs.
Dry Bulk:
Sical handles all commodities with caution and care. Movement of heavy dry bulk
requires it to be highly regulated as the commodity is not packed and spillage can
raise environmental concerns. Sical handles the following:
Coal Coke
Limestone
Sulphur
Rock Sulphate
Urea
DAP and MOP
Liquid Bulk
Sical owns a fleet of tank containers for transportation of liquid bulk varying from
petrol to diesel.
Steel Material
23. 23
Inland transportation of steel material like HR coils, CR coils, Slabs, Billets, Pig
Iron, Wires and Plates from source to destination is well coordinated. We also
handle metals like copper anode and aluminum ingots
Ores:
Sical has strong presence at all major and intermediate ports in India. The ports
infrastructure, stevedoring and fleet of trucks equipped with tracking facilities aids
in smooth movement of ores like:
Iron ore
Manganese ore
Chrome ore
Iron ore pellets
Over Dimensional Cargo:
Sical handles safe and secure transportation of over dimensional cargo of varying
sizes and shapes with ease in specially designed vehicles. Plant and machinery,
heavy duty handling equipment, project cargo, transformers and generators are
moved to their destinations without hiccups during transit.
Containerized Cargo:
Sical owned containers are also used in the movement of cargo. Packaged goods
like Fertilizers, Cement, Sugar, and Food items, FMCG, Consumer Electronics,
Tubes and Computers are containerized. Lashing, choking and palletizing are used
to secure the cargo to prevent any damage.
24. 24
Organized Players in Major Logistics Segment
Important Logistics Segment:
Container freight Station: CFS are facilities set-up near the port for handling of in-
transit containers, examination and assessment of cargo by regulatory agencies like
Customs for the Exim trade of the country. They are a critical part of the logistics
chain in relation to the movement of containerized cargo. All the ports (major and
minor) across the country have CFS facility
The total CFS business opportunity in India (Based on FY 11 numbers) is
estimated at Rs. 255 bn and is expected to grow at a CAGR of 12% per annum in
line with the estimated growth in container volumes
25. 25
Third Party Logistics: It includes bundling together of logistics services like
transportation, warehousing, cross docking, Inventory management, packaging and
freight forwarding. The service provider generates margins over the entire logistics
chain which generally ranges between 10-12% (EBIDTA) as compared to~5% in
pure trucking. End to end Logistics outsourcing is likely to be a significant growth
opportunity. The growth in the 3PL market is expected to be in the range of 25-
30% CAGR over FY11-13E. The size of the 3PL industry is estimated ~US$1.5 bn
in FY11 (1% of logistics cost)
Express logistics: The express industry handles two types of consignments, i.e.
documents and non-documents. Documents account for~60% of the total organized
sector revenues while non-documents constitute only 40% of the market. The
remaining 10% is serviced by EMS Speed Post. However, within the domestic
sector, unorganized players offer a price advantage over organized players. As a
result, the organized sector has only a 45% share of the market with unorganized
players having comparable 41% share. The remaining 14% market share lies with
EMS Speed Post
26. 26
PORTER'S FIVE FORCE MODEL OF SICAL LOGISTIC:
Threat of new entrants
No entry barrier in terms of requirement for
licensing needs and industry is vulnerable to easy
scale –up and intense competition
No entry barrier in terms of requirement for
licensing needs and industry is vulnerable to easy
scale –up and intense competition
The industry is highly customer oriented with
multiple vendor options available to customers
Threat of Substitutes
The industry is highly
customer oriented with
multiple vendor options
available to customers
Rivalry
among
competitors:
Lack of
differentiation
in services
leads to
commoditizati
on and further
price erosion
Bargaining power of Suppliers
Government influence on fuel prices makes it
difficult for players to predict, control and pass
through fuel costs to customers
28. 28
This show that company maintains their client very well it’s 45% of revenue is
collected from single customer and if we see 10 customer of SICAL than its 76%
of revenue is generated from them so company deal in bulk basically. So this
makes company to be different in market from its competitor.
30. 30
RATIO ANALYSIS
SOUTH India Corporation (Agencies) Ltd (SICAL), the MAC group company, has
undertaken a capital restructuring exercise to bring down its debt-equity ratio. At
the same time, the company says it will make supply chain management (SCM) its
core area and think of hiving off divisions that do not hold bright prospects.
From the present debt-equity ratio of 2.1:1, the company hoped to bring it down to
1.5:1, with the interest cover being well above 2. This would be achieved by
bringing in equity partners, hiving off divisions and enhancing promoter’s equity.
The company had retired some high-cost debt and also hoped to access long-term
funds for infrastructure projects.
In order to meet the capital expenditure related to execution of the on-going project
company planned to conserve the amount for the project development so they are
not paying any dividend
31. 31
Years March-
13(1)
Mar-
12(2)
Mar-
11(3)
Mar-10
(4)
Mar-
09(5)
Current Ratio 1.5 1.3 1.3 1.4 1.7
Current assets
Current ratio=
Current liabilities
Company has maintained its current ratio continually (5yrs) it has always been to 1.3 to 1.5
which means co. asset is more than liability but not so much. Basically 2:1 is the ideal current
ratio for any co. so co. has to improve the current assets or decrease the current liability.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
1 2 3 4 5
Current Ratio
Current Ratio
32. 32
Debt-Equity Ratio
Years March-
13(1)
Mar-
12(2)
Mar-
11(3)
Mar-10
(4)
Mar-
09(5)
Debt-Equity Ratio 0.7 0.6 1 2.3 2.9
Outsider’s funds
Debt equity ratio
Shareholder’s funds
It Is calculated to measure the relative claims of outsiders and the owners against the firm’s
assets. This ratio indicates the relationship between the outsider’s funds and the shareholders’
funds.
Ideal ratio: 2:1;
It means for every 2 shares there is 1 debt. If the debt is less than 2 times the equity, it means the
creditors are relatively less and the financial structure is sound. If the debt is more than 2 times
the equity, the state of long term creditors are more and indicate weak financial structure.
0
0.5
1
1.5
2
2.5
3
3.5
1 2 3 4 5
Debt-Equity Ratio
Debt-Equity Ratio
33. 33
Debtor’s turnover ratio
Years March- 13(1) Mar-
12(2)
Mar-
11(3)
Mar-10
(4)
Mar-
09(5)
Debtors turnover ratio 4.8 6.4 4.5 3.3 2.7
In the year ’13 the debtor turnover ratio was 4.8 days which has increased from the year ’09.
Higher debtor turnover ratio is good because higher debtor turnover ratio means, more fastly, we
are collecting money.
Lower debtor turnover ratio is not good because it tells us that we have not managed debtor’s
better ways. Money from debtors is not collected fastly.
Company has increased it debtor turnover ratio compared to last 5 years but it has fallen in ’13
due to high competition so company need to do some innovative to regain it debtors.
0
1
2
3
4
5
6
7
1 2 3 4 5
Debtors turnover ratio
Debtors
35. 35
PE RATIO
Years March- 13(1) Mar-12(2) Mar-11(3) Mar-10
(4)
Mar-09(5)
PE 28.4 28.2 26.6 11.9 14.4
Years March-
13(1)
Mar-
12(2)
Mar-
11(3)
Mar-10
(4)
Mar-
09(5)
Long Term Debt-Equity Ratio 0.4 0.2 0.7 2.2 2.7
0
10
20
30
1 2 3 4 5
PE
PE
0
0.5
1
1.5
2
2.5
3
1 2 3 4 5
Long Term Debt-Equity Ratio
Long Term Debt-Equity Ratio
41. 41
KE (COST OF EQUITY)
Ke=Rf+Beta*(Rm-
Rf)
Rm -0.14209
Beta -0.0163
Rf 0.08
Ke 0.083621 8.00%
Benchmark 14%
Since the bench mark for ke is 14% but companies ke is approx. 8%
so we should not invest now in this company. When ke will rise in
future than we should invest in this company. Since this SICAL is
coming up with lots of new projects than we can think for investing
in this particular company.
RRE
-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
2004-08 2005-09 2006-10 2007-11 2008-12 2009-13
GDP
RRE%
42. 42
Year
2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
PAT(Rs. In Cr.) 11.72 13.29 13.01 15.5 13.56 20.79 21.71 65.1 34 9.66
Dividend 0 0 0 0 0 0 0 0 0 0
RE 11.72 13.29 13.01 15.5 13.56 20.79 21.71 65.1 34 9.66
5 Yr Moving Total 2004-08 2005-09 2006-10 2007-11 2008-12 2009-13
151.26 155.16 136.66 84.57 76.15 67.08
RRE -0.02743 -0.09849 -0.10287 -0.36294 -0.13173 0.073582
RRE% -2.74299 -9.84898 -10.2873 -36.2945 -13.1735 7.358191
Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
GDP Rate 8.1 7 9.5 9.6 9.3 6.7 8.6 9.3 6.2 5
5 yr moving Total 43.5 42.1 43.7 43.5 40.1 35.8
2004-08 2005-09 2006-10 2007-11 2008-12 2009-13
GDP 8.7 8.42 8.74 8.7 8.02 7.16
RRE% -2.74299 -9.84898 -10.2873 -36.2945 -13.1735 7.358191
From the above graph we can see that RRE of SICAL logistic is not dependent on
the GDP. From the year 2004 to 2010 it was dependent on some factor but after
that it became independent even though GDP was not fluctuating so much RRE of
SICAL fell but after few year it gained back.
43. 43
SICAL STOCK PRICE VARIATION IN 1 YEAR
SICAL’S STOCK PRICE COMPARISION WITH ITS COMPETITOR
44. 44
SICAL Logistics Stock Analysis
Current Stock
Price
Market Cap My Views
Rs.56.1 Rs. 312 Crores
Looks fairly valued limited signified upside from
current levels.
Sical Logistics Ltd has multiple business segments within the Logistics sector including
Stevedoring (Port Handling) operations in various ports in South India,
Road Logistics by transporting cargoes thru Trucks by Road. The company owns 249
trucks and hires additional trucks on need based
Travel Agency - Rail and Air ticketing, Hotel booking and tour packages
Shipping and Customs House Agency
Apart from this, thru its subsidiaries (And step down subsidiaries) the company is engaged in
Container Freight Stations (CFS) in Chennai and Tuticorin. It owns Railway Rakes which runs
on Pan India basis. Sical Logistics has also completed a 6 Million Iron Ore terminal at Ennore
Port on BOT (Built-Operate-Transfer) basis and is ready for operation. But due to ban on export
of Iron Ore from Karnataka, this terminal is not operational currently. Sical Logistics handles
cargo for TNEB's Power Plants and has also bagged a contract from Neyveli Lignite Corporation
Ltd for transporting coal thru rail-sea route for their power plant at Tuticorin.
Financials (Rs. In Crores Except Ratios)
Historical Stock
Performance
Year Revenues PAT EPS
EBITD
A
Dividend DEBT Equity
Debt
to
Equity
Low
Price
Rs.
High
Price
Rs
Low
PE
High
PE
2009 479.61 5.4627 1.2 41.7671 0 749.94 196.118 3.82 19.65 205.75 16.38 171.46
2010 537.4 26.3645 5.92 44.2658 0 469.188 327.195 1.43 21.85 101.95 3.69 17.22
2011 570.475 10.7578 2.54 27.5599 0 334.008 389.074 0.86 61.9 100.7 24.37 39.65
2012 507.871 13.2875 2.39 55.1724 0 205.255 402.68 0.51 67.1 80.5 28.08 33.68
2013 513.208 11.7182 2.11 69.3268 0 301.292 416.943 0.72 60 73.8 28.44 34.98
Though the projects and business all looks promising, still there has not been significant
improvement in their profits due to interest costs eating into the profits. There have been no
dividends so far, debt to equity has been average and flat to decline in revenues due to certain
restrictions on port activities and slowdown in trade. In light of that at current market
capitalization of Rs 312 crores, it looks richly valued for the financials it has posted so far. Even
the consolidated figures’ including its subsidiaries doesn’t look impressive. The future prospects
45. 45
based on current capacity of the company also appears to be in line with its past performance.
In light of the above facts, I feel the stock is fairly valued limited any significant upside from
current levels. Hence I would avoid this stock at current levels. The company prospects and its
market valuation makes the stock little attractive currently. Some of the best managed logistics
company and which can considered as better alternates to Sical Logistics include Gateway
Distriparks and Container Corporation of India . But even they are not available at great bargain.
Credit Risk Assessment:
Long track record and integrated nature of logistics operations Sical has been in the logistics
business for more than five decades and operates in almost all the major ports in the country. The
company has three business divisions namely Port handling division, Trucking division, and
Customs House Agency. Port handling division is the major contributor (69% of total income in
FY12) and the primary activity includes loading and unloading cargo to/from vessels at the ports.
Major cargo handled by this division is coal, in addition to iron ore and dolomite. Sical has a
Berth Reservation Scheme (BRS) agreement (valid till Feb 2018) for JD 5 dock with Chennai
Port Trust and has exclusive rights for handling the vessels at this berth. On a consolidated level
Sical along with its subsidiaries operates in related line of business including Rail Logistics
(SMART-Sical Multimodal and Rail Transport), Container Freight Stations (SDL-Sical
Distriparks Ltd), and Container terminal operation (PSA Sical) which enables the company to
provide integrated logistics solution at the consolidated level. SDL operates container freight
stations at Chennai, Vizag and Tuticorin. SMART is primarily into rail operations and operates
rake across India.
Stable revenue aided by the long term contract from TNEB
Sical has long-term agreement (up to Feb 2022) with Tamil Nadu Electricity Board (TNEB),
whereby it had setup a mechanized coal handling facility at Ennore Port under BOT (Build-
Operate-Transfer) model. TNEB has guaranteed minimum cargo of 6 million tonnes of coal per
annum which ensures a stable stream of revenue to the company. In addition, the company also
handles coal for TNEB at Chennai and Tuticorin Port. TNEB is a major client for Sical
contributing to a significant share of its total income. During FY12, Sical generated around 44%
of its total income from TNEB as against 32% of total income in FY11.
Limited competition in stevedoring operations and highly competitive nature of trucking
Business:
Coal handling requires effective port operations, liasoning with various authorities and good
understanding of costs which imparts high entry barriers to this business and results in only a
limited number of players being present in this segment. Trucking division is generally highly
46. 46
competitive. The industry faces stiff competition from both organized and un-organized sector.
Sical has built its expertise in handling liquid cargo and also derives revenue from handling bulk
cargo, engineering goods, project cargo etc. The company operates largely on an annual contract
basis with its customers and derives majority of its income from South India.
Significant exposure to subsidiary/group companies
Sical had significant exposure of Rs.412 cr as on March 31, 2012 to its subsidiaries by way of
investments and loans & advances. The major exposures were with Sical Infra Assets Ltd
(Rs.112 crore as on March 31, 2012) which holding company for SMART & SDL, Sical iron ore
terminal Ltd (Rs.118 crore) and Bergen offshore logistics (Rs.112 crore) which is engaged in
dredging activity.
Overall the exposure to subsidiaries in the form of loans and advances has increased to Rs.412
crore as on March 31, 2012 as against Rs.361 crore as on March 31, 2011 primarily due to
financial support extended to Sical Iron Ore Terminal Ltd (SIOT) for servicing its interest
payments and increase in investments in Sical Iron Ore (Mangalore) Terminal Ltd.
Though the performance of few its subsidiaries have improved in FY12, the subsidiaries in
which Sical has major exposure are yet to generate any returns. On a consolidated basis, the
company reported a PAT of Rs.16crore (net loss of Rs.11 cr in FY11) on a total income of
Rs.787 crore. The improvement was aided by the improvement in performance of some of the
subsidiaries including Sical Distriparks Ltd and Ennore Automotive Logistics Ltd.
In addition to the investments and loans & advances, Sical has also extended support to its
subsidiary/group companies by way of corporate guarantees for the loans availed by these
companies. As on March 31, 2012, the corporate guarantees extended to subsidiary/group
companies amount to Rs.468.62 cr, of which SIOT forms the major share at Rs.350 cr as on the
same date.
Delay in operationalization of Sical Iron Ore Terminals Ltd (SIOT)
SIOT was established for the purpose of setting up Iron Ore Handling Terminal at Ennore Port.
Though the terminal was commissioned in November 2010, it is yet to start commercial
operation due to ban on iron ore mining and exports by Government of Karnataka. In view of
above, SIOT has got extension of Commercial Operations Date (COD) for 2 years i.e till August
2014. Even though the approval for extension of COD has been obtained, the company has not
approached for revision of repayment terms in respect of SIOT’s term loans from its bankers. As
the SIOT facility is not generating cash flows, Sical has been supporting SIOT’s debt servicing
by way of loans and advances.
Even though SIOT expects to convert the Iron Ore Terminal to Multi-purpose cargo terminal and
start commercial operations, servicing of debt obligations by SIOT on its own is likely to take
47. 47
time. Going forward, the continued servicing of interest and principal instalments of SIOT is
likely to be a strain on the financial risk profile of Sical.
Demonstrated support of promoter
The ‘Coffee day group’ has been extending assistance to Sical by way of equity infusion.
In April 2011, the company has redeemed FCCBs with a maturity value of USD 50.16 million
(Rs.226 cr). The redemption of FCCB’s were partly funded through equity infusion of Rs.122
crore , financial assistance from promoter in the form of unsecured loan amounting Rs.67 crore
which was subsequently replaced by term loan during FY12. Going forward, continuation of
need based support from the promoter group would remain a key rating sensitivity.
Prospects
With stable revenue from long-term contracts, established business operations and stable profit
margin, the financial position of Sical is likely to remain stable. Further, new businesses such as
handling logistics activity for Coffeeday group, dredging activity and recently secured ‘end-to-
end’ coal handling contract of NLC Tamil Nadu Power Ltd provides revenue visibility to Sical in
the long term. At the same time, though Sical’s subsidiaries are in related line of businesses and
synergies of integrated operations imparts strength to the group as a whole, significant exposure
to group companies by way of investments and corporate guarantees continue to be a key
concern.
SICAL”S project and plan in future
The process of downsizing was on and the employee strength had come down from
3,500 a year ago to about 2,700 now. They are further planning to reduce to 2,200
in a year. The number of working directors had also come down to three from
seven. These measures had resulted in saving of about Rs. 6 crores annually.
Apart from SCM, the company had identified marketing, sugar and distillery
divisions as areas of growth. The company planned to have a 22 MW co-
generation facility for the sugar division. The company would dispose of
businesses where it felt growth prospects were not good.
SICAL’S target is to be positioned as one of India's largest SCM companies using
the port as an important gateway. It would even offer to source certain
commodities for its customers to offer them a complete chain - from sourcing to
48. 48
deliver the product at the door-step. The company will be introducing a software
tool that would help its clients track the movement of the cargo on-line and also
resolve SCM problems.
SICAL had formed a 50:50 joint venture with Coeclerici Logistic of Italy to form a
company called SICAL Coeclerici Logistics Ltd. The Italian company had a large
presence in the Capesize and Panamax sized vessel markets and specialized in
offshore logistic while SICAL's expertise would be in offering on-shore handling
facilities.
Joint venture will bring out of the need to offer low-cost logistics options to the
large number of mega projects that were under way. The new company would
handle the coal movement for SPIC's power project coming up at Tuticorin. It is
also holding discussions with a couple of other power projects on the West Coast.
Mitsuba Corporation of Japan, which was a collaborator for the auto component
business, was interested in taking an equity stake and SICAL was holding
discussions on how much equity to offer to it.
Samsung is going to supply cranes for the contract that SICAL has bagged to
handle coal for the Tamil Nadu electricity board the Ennore Port. It would be
investing about Rs. 80 crores in this facility and another Rs. 15 crore s at the
Jawahar Dock - 5 in Chennai Port. About Rs. 20 crores of the proposed investment
would come in through equity, some funds through the sale of assets and the
balance through debt. On Pearl Ships, financial institutions had been approached to
reschedule the loan.
Achievements:
More than 26 million tons of cargo handled per annum
Highest tonnage of 23200 MT of Limestone handled in a single day at
Chennai Port
Highest loading of 36015 MT of Iron ore in a single day at Visakhapatnam
Port
Highest Coal discharge of 34,078 MT in a single day at Mangalore Port
More than 6 Lakh TEUs (Containers) handled per annum
Own equipments deployed at various ports increasing our efficiency
49. 49
Experience in providing end to end logistics services for over 5 decades
Market leader in container freight station for consecutive 5 years in South
India
Awards
Sical won Tamil Chamber of Commerce EXIM achievement award for
"Stevedore of the Year 2011-2012"
South East Conclave award for “Best CFS of the year” 2012
Sical won “Stevedore of the year 2011 – 2012” award from Ennore Port
Limited
Chamber of Commerce EXIM achievement award for Best Stevedore - 2011
Chamber of Commerce EXIM achievement award for Best CFS - 2011
South East Conclave awards for Best Logistics Company of the year - 2010
Express Logistics & Supply Chain Conclave awards for Best Container
Logistics Service Provider- 2008 and Best Bulk Logistics
