Management Discussion
a) Industry structure and developments
In the past decade, containerised movement of export import cargo grew by 14% perannum, compared to the overall growth in Export Import trade of 8% per annum.Containerised cargo represents 30% of India's Export Import Trade, compared to the globalaverage of over 70%.
JNPT accounted for more than 50% of the total containerized traffic handled out ofIndia, by handling around 4 million Teus. The country's second biggest container port atChennai handled over I million TEUs.
b) Opportunities and threats
Growth of containerisation in both Export - Import and domestic trade, private sectorparticipation in ports and movement of containers by rail, liberalization of Governmentpolicies and increase in the country's foreign trade present the company withopportunities for expansion and increase in profitability. During the past few years, theCompany has taken several initiatives for growth and expansion. The company taken overPunjab State Container and Warehousing Corporation Limited's CFS at JNPT under anOperations and Management agreement for a period of 15 years from February 2007. The CFShas been revitalised and renovated, adding to the Company's capacity at JNPT, which isIndia's premier container port. The Company continues to prune costs and augment itsequipment for handling and transporting containers, which are operated by contractors. TheCompany is in the process of setting up a CFS at the fast growing port of Kochi in a jointventure with Chakiat Agencies Private Ltd. The Company's rail subsidiary, Gateway RailFreight Limited (GRFL) has expanded its business relating to operating container trains onthe Indian railways network. GRFL has put in place a fleet of railway rakes / trailers andICDs to provide end-to-end solution to customers across the country. The Company's coldchain logistics subsidiary Snowman Frozen Foods Ltd. continues to be a premier player inthis emerging business.
Competition from existing and new entrants and managing the geographical / capacityexpansion present the company with new challenges.
c) Segment-wise / Product-wise performance
The Company's entire business is from CFS & ICD operations. There are no otherprimary / secondary segments in the Company's business.
d) Outlook
There has been a significant downturn in global trade during later half of 2008-09. Weexpect a recovery in Exim trade in later half of 2009-10. The expanded capacity of CFS atJNPT, increase in the business of rail movement of containers and growth in the emergingcold chain logistics business are expected to have positive impact on the Company'sbusiness and profitability.
e) Risks and concerns
Increase in fuel costs could result in increase in Company's major costs of transportand handling. Increase in container traffic vis-a-vis creation of capacity at the portscould lead to congestion at ports which would result in decline / delay in the throughputhandled by the Company. The revenues of the Company are concentrated on the containervolumes handled by major shipping lines and consolidators, who use its CFSs at variouslocations.
f) Internal Control systems and adequacy
The Company makes use of IT enabled solutions in its operations, accounting and forcommunication within its facilities and with customers and vendors. Financial andOperating guidelines are put in place to regulate the internal management. The Company'saccounts and operations are subject to internal audit and review by the Audit Committee ofthe Board of Directors.
g) Financial / Operational performance Operations:
The Company's income from operations & other income grew by 19% from Rs. 1,758.47million in 2007-2008 to Rs.2,092.86 million in 2008-2009. The company maintained itsthroughput at 247,618 Teus in 2008-09 (2007-08: 251,728 TEUs). The Profit before taxincreased from Rs.867.65 million in 2007-08 to Rs.1,073.24 million in 2008-09 afterproviding for interest Rs.7.03 million (2007-08: Rs.0.62 million) and depreciation Rs.149.53 million (2007-08: Rs. 133.47 million).
Finance:
During the year, HDFC Bank Limited sanctioned credit facilities comprising of term loanRs.250 million, overdraft facility Rs.100 million and non-funded facilities Rs.400 millionto the Company. The Company has availed Rs.100 million from the term loan facilitysanctioned by HDFC Bank Limited. The Company has given guarantees in respect of loans Rs.1,939.11 million availed by subsidiary company Gateway Rail Freight Ltd.
During the year, the Company has bought back 7.88 million shares for an aggregateamount of Rs.640 million.
The income from interest on fixed deposits with banks and investments reduced fromRs.89.41 million in 2007-08 to Rs.36.86 million in 2008-09, as the available funds weredeflect for buyback of shares and capital expenditure during 2008-09.
h) Human Resources
The Company continued to have cordial and harmonious relations with its employees Humanrelations policies were reviewed and upgraded in line with the Company's plans forgeographical expansion. Initiatives on training and development of human resources wereundertaken The Company had staff strength of 150 as on 31st March 2009, compared to 136employees as on 31st March 2008
i) Cautionary statement
Statements made in this report, particularly those which relate to ManagementDiscussion and Analysis, describing the Company's objectives, protections, estimates andexpectations may constitute "forward looking statements" within the meaning ofapplicable laws and regulations Actual results might vary materially from those eitherexpressed or implied