Container Corporation Of India Ltd

INDUSTRY OVERVIEW

The Indian Multimodal scene has undergone massive changes with the advent of multiplecontainer train operators since 2006. Presently, 16 container train operators (includingCONCOR) are operating in the business domain of which 12 hold a pan-India license. Restfour have opted for limited, route specific licenses only. Their operations initiallystarted in a limited way by two operators in April, 2006. More new entrants startedoperations subsequently and they have been growing consistently with induction of newrakes and development of new ICDs. These operators have also been using goodssheds/terminals of Indian Railways as well for their operations in the domestic sector.Currently, the container rail industry has 330 rakes, including 230 rakes of CONCOR. Thishas given a boost to the hinterland movement of containers in the country, not onlythrough the old established container handling ports, but also through the new ports,viz., the ports of Mundra, Pipavav & Vizag (VCTPL). This is likely to result infurther increased level of hinterland penetration of container traffic in the near future.

EXIM & DOMESTIC BUSINESS

Like all other companies in this field, your company also continued facing, especiallyduring first half of the year, the adverse impact of unprecedented recession in the worldeconomy which started in 2008-09. However, our performance during the second half of thefinancial year was better, during which your company registered a growth of 10.4% in EXIMvolumes, as compared to the corresponding period of previous financial year. The overalltraffic handled in 2009-2010 was 24,21,247 TEUs as compared to 23,08,232 TEUs handledduring the last financial year. In the Domestic business segment, total handling was5,38,970 TEUs during 2009-10, as compared to 4,53,273 TEUs handled during the financialyear 2008-09.

Despite worldwide economic slowdown and competition posed by other players, CONCOR hasnot only retained the business of its existing customers, but also grown. With continuanceof the recessionary trend and stiff competition from the other train operators, it will bea challenge for us to retain our share and grow. In order to attract more volume, yourcompany will continue to match and strive to surpass the services offered by otheroperators both in terms of quality of services (reliability) and pricing (cost effectivesolutions) on the basis of our strengths arising out of large asset base of rakes,terminals, containers, container handling equipment, and related software investments andlast but not the least our unbeatable human resources.

With the sustained efforts of the Management and Staff of your Company, the performanceachievements during the year under review on all the Performance Parameters have matchedthe ambitious targets set in the Memorandum of Understanding (MoU) signed with theGovernment. Your company expects to achieve "Very Good" MOU Rating forthe year 2009-10.

INTERNAL CONTROL SYSTEMS

CONCOR has in place well defined roles, responsibilities and authorities for employeesat various levels. This, coupled with the robust internal MIS systems, ensures appropriateinformation flow to facilitate effective monitoring. Adherence to these processes ismonitored through frequent internal audits. Your company has an internal audit system thatrequires the internal audit firms to certify the appropriateness of internal controls inoperation. The internal auditors are external firms directly reporting to the managementat higher level, which also ensures their independence. Reports of the internal auditorsare reviewed and compliances are ensured and the reports along with the compliances areput up to Audit Committee periodically.

SECURED AND UNSECURED LOANS

No secured and unsecured loans were taken during FY 2009-10.

An amount to the tune of Rs. 350.35 crores was capitalized during the year. The mainadditions are on account of construction of Terminal Infrastructure, purchase of Wagons,Handling equipments etc.

WAGONS

During the year under review, 720 high speed BLC wagons have been added to the existingfleet of CONCOR owned wagons; increasing the holding of high speed wagons to 8837. Totalwagon holding is 10,194 units as on 31-03-2010.

INVENTORIES

The company being a service company does not have any "stock in trade". Theinventory is represented by stores and spares kept by the company for maintenance of itsown equipments.

SUNDRY DEBTORS

Sundry debtors are 0.53% of the operating income of the year. Provision for doubtfuldebts, wherever considered necessary, has been made.

CASH AND BANK BALANCE

The company keeps all its cash balances in short and medium term fixed deposits withthe banks. These cash reserves have been retained for financing the expansion plans aswell as investments in JVs as per the Capex plan of the Company.

INCOME

Income from operations has grown by 8.44% over FY 2008-09. Between the two businesssegments i.e. EXIM & Domestic, EXIM segment contributes the major share of freightrevenues. Increase in business volumes and successful induction and running of High SpeedWagons have been the main reasons for the company's growth.

EXPENSES

Terminal and other service expenses have increased by 11.13% over FY 2008-09. Theincrease in direct expenses in the current year is due to rise in corresponding operatingincome and increase in rail freight expenses.

ADMINISTRATIVE EXPENSES

The increase in administrative expenses is 2.05% over FY 2008-09, which is marginal andis due to rise of expenditure on rebates, security expenses etc.

EMPLOYEE REMUNERATION

The employee cost has grown by 3.74% over FY 2008-09 which is on account of annualincrements, promotion, increase in dearness allowance, provision for employee benefits,etc.

TAXATION

In making provisions for income tax, the requirements of Accounting Standard-22 havebeen duly complied with. As detailed in the notes on accounts, this has resulted in adeferred tax provision of Rs. 17.14 Crores during the year. Like in the previous year, inthe current year also, the company has availed tax benefit under section 80-IA of theIncome Tax Act, 1961.

OUTLOOK

Even though the impact of global recession continued to impact the Export-Import Tradeof India adversely during 4th quarter, there was a continued improvement in the scenariofor CONCOR. After successive decline in the EXIM throughput during first two quarters, theEXIM throughput recorded a marginal gain of 1.9% in the third quarter which furtherimproved by 19.6% in the fourth quarter. On the domestic front, the growth in volumesduring 4th quarter was a healthy 15.8% this year (2009-10) as against 5.6% recorded in the4th quarter of last year (2008-09).

STRATEGY TO MEET THE CHALLENGES

Your Company has successfully adopted a Cost Management Strategy which helped inreducing overall costs and maintaining profit margins even in a volume decline scenariowitnessed in 2009-10. It will continue the focus on costs so as to maintain profitabilityeven in a shrinking market scenario. Simultaneously, your Company is also alive to thecompetitive scenario and has been dynamic in taking suitable pricing initiatives onselective basis. Focus on these strategies and the steps being taken to improve theQuality of Services will help your company to remain the market leader in terms ofexcellence in "quality of service" and providing value for money to its esteemedcustomers.

For and on behalf of the Board of Directors

(Vivek Sahai)

Chairman

Date: 17.08.2010

Place : New Delhi.