Sensex 27643.88 -313.62 (-1.12%)25-May-15 16:00
Nifty 8370.25 -88.7 (-1.05%)25-May-15 00:00
Arshiya International Ltd is an Indian headquartered multinational company with offices spanning across India, Singapore, Australia, Dubai, Qatar, Oman and the United States. Arshiya is a leading entity in providing knowledge driven solutions to its global customers specifically focused on the areas of innovative technology, business process outsourcing, supply chain, demand chain and financial flow management services. Arshiya is rapidly expanding its business capabilities through continuous internal development and aggressive acquisitions in complimentary space.
Ajay S Mittal, Chairman, Arshiya International Ltd, has a diverse leadership experience across many industries and had served on board of 12 companies. In addition to his position as Chairman of the Board and CEO of Arshiya International Ltd; he also serves on M.G.Mittal group's internal management committee. During the past 17 years he has held key management and director positions within the M. G. Mittal Group (one of India's leading business conglomerate) spanning commercial and private real estate, financial services, manufacturing, international trading, global supply chain management and information technology. After completing his graduation in Commerce from India, he received his M.B.A from The United States and upon returning to India created new business entities in international trading, logistics and I.T. His vision to develop a new Indian multinational business model resulted in the creation of Cyberlog Technologies, BDP India and Gulf, and Arshiya International holding company.
Replying to Anil Mascarenhas of India Infoline, Mittal says, "We have over 400 clients and top 5 contribute to 15% of our profits."
Supply chain means a lot more than managing logistics. Tell us more about it.
First of all, the word supply chain is not being defined properly in the India market. Logistics is moving a product between two points combining shipping (air and ocean), freight forwarding and customs clearance, warehousing and trucking. Supply chain is in reality, an entirely new concept to India. It entails the full logistics scope as noted above, plus a much more dynamic integration with the customers. Supply chain starts with raw materials feeding the factories, minimum order quantities of factories, sales forecast and forecast accuracy, and reverse logistics for returned items. The technology integration is at a much higher level and the technical expertise of supply chain professionals requires three-dimensional thinking. In its truest definition, supply chain services should be managed by a 4PL concept, where the managing entity can be neutral in identifying cost savings, efficiency enhancements, and creative ways of building a dynamic supply chain which can constantly adapt to changing market conditions. This emerging trend is new to India, and we believe that Arshiya International is clearly a trendsetter in introducing this new business model to India through one of our subsidiary companies.
What are the entry barriers to this business? What are your key strengths compared to the competition?
The main barrier to entry is that the customer has to be open to changing their business in order to gain from the competitive advantages, which results from full supply chain implementation. In essence, the customer needs to allow their business to go through a "supply chain MRI" where everything is visible so creative changes can be launched. Many companies are reluctant to change are satisfied with the traditional logistics model where shipping transit time and low cost freight rates are the primary measure of success. In Supply Chain, savings can be in preventing lost sales, huge savings in working capital, streamlining of processes, reduction in costs, increased market share, etc. Visionary leaders are willing to constantly innovate their business strategies and processes to retain competitive advantage.
Another barrier to entry is recruiting and developing the right talent who can master the skills of supply chain analysis and execution. As this is a new area for India, it will be necessary to combine global knowledge with local talent development. Technology will also be a barrier to entry, since integration of technology is a key driver in SCM efficiency. In the case of Arshiya, we have combined supply chain expertise from around the world with recruitment of top talent at leading universities such as IIM-A and SP Jain to create an Indian and Middle East pool of talent, which is still evolving. We have also purchased an I.T. Company in Singapore, Cyberlog, with the majority of programming resources in India, in order to control the technology solution.
What is the industry size and what is your share?
Supply chain management by the true definition, is a new concept in India. Therefore, Arshiya is one of the first companies to enter this space, and we are creating unique SCM Models for India and the Middle East. Our regional free trade warehousing zones (FTWZ) facilities and national rail services will further enhance our leadership position in this space. It is difficult to define supply chain competitors as the market is still focused on traditional logistics overall.
You just got the license to run container freight trains. What does this mean for your company?
It means a lot for Arshiya, as we can leverage on the rail network to bring down end-to-end delivery costs for out customers with greater visibility, efficiency and turn around time.
What kind of cost advantage will you get from this deal? How much would be passed on to the clients?
Rail is normally 40% cheaper than road costs and we will share the reduced costs with our clients on an overall saving basis.
What are your capex plans for the coming years. How much have you set aside for setting up the railway links?
Total Capex is over Rs45bn in the next 3-4 years with railways investment being around 15%.
You plan six more warehouses in the next five years. Besides India, where else are you planning to set up warehouses? Is it Oman?
Oman is the location for us to build the Free Trade Warehousing Zone (not warehouses only) outside of India. Middle East is one of the fastest growing region and Sohar in Oman is most strategically placed/located with the right infrastructure at lower costs than other options in the Middle East. Trade between India and Middle East is exploding too at a very high rate.
What other plans do you have regarding use of railways?
Apart from EXIM cargo we will also look at domestic cargo for our customers with sufficient infrastructure such as rail sidings.
Arshiya had earlier committed an investment of Rs30bn in two phases for setting up FTWZs in JNPT, & Noida-Delhi and Oman. What is the progress on the same?
They are all on track as per the schedules and plans.
What kind of tax incentives do you enjoy?
In the FTWZs we will enjoy same benefits as SEZs.
How much have you earmarked for acquisitions?
We are not looking at any acquisitions now.
Tell us more about Arshiya's key business entities. What is the plan for these businesses?
Arshiya Logistics Infrastructure that is building new concept FTWZ?s across India and the Middle East. Arshiya Rail is developing the nationwide rail network connecting to our FTWZ Logistics Parks and the Hub and Sub Hub network feeding products across India. BDP India and Middle East entities focus on global logistics (freight forwarding , shipping, etc.) Key customers include Bhushan Steel, L&T, Himedia Laboratories, Rohm and Haas, Quest International, Steel Case, Cairn Energy, FFE Minerals, Reebok, etc. Customers include leading Indian companies and U.S. And European Multi-nationals.
Genco India is a new entity which we created a little more than one year ago to provide full Supply Chain Management Services in a 4PL fully transparent model. Key customers include a number of leading retail entities and we are currently doing studies for several more companies expected to move forward with us in the near future. Genco India has long-term confidential contracts and is providing support in forward Logistics, reverse logistics and returns management, and supply chain mapping, analysis, and full execution of solutions, including technology integration.
Cyberlog Technologies is our leading edge technology company with a full suite of web-enabled tools from shipping documentation, global shipping tracking and tracing, on-line warehousing visibility, cost component visibility, etc. Cyberlog was also recently selected by the Singapore Government to help develop the Trade Exchange.
How many clients do you have? Who are your top 5 clients? How much do they contribute to revenues and profits?
We have over 400 clients and top 5 contribute to 15% of our profits.
You were in talks with some Japanese companies. Give us an update.
We are still discussing the finer modalities, till then we have a non-disclosure agreement.
Arshiya had acquired around 130 acres of land in Mumbai and were to buy further 45 acres. Has it been completed?
The balance is being acquired and should be complete in one month.
How much of the Rs3.5bn raised in the QIP issue has been utilized?
What is the latest shareholding pattern? Any plans to raise stake?
Promoters have just over 40% and no immediate plans to raise any further equity.
What is your dividend policy? Your message to shareholders?
We will continue to give our shareholders dividend. Message to the shareholders is "We have just began."
India Infoline Research Team / 14:59, May 20, 2015
GPIL reported 13.5% yoy decline in operating profit as the impact of higher volumes was offset by lower product prices