Hindalco boosts presence in logistics, aims to lower India's cost by 15%

Hindalco Industries, the flagship company of Aditya Birla Group, is strengthening its presence in India’s transportation segment, to help lower logistics cost by 10-15 per cent.

“We are entering the Rs 1000 crore truck-and-trailer market in India, replacing the existing mild-steel usage with aluminium alloy,” managing director Satish Pai told Business Standard. “This will bring down logistics cost in the segment by 10-15 percent as the lightweight aluminium vehicle will carry more tonnage,” he added.

Aluminium trailers along with the recently launched bulkers are the two consumer-facing products the company is looking to establish in the domestic market. These trailers and bulkers can facilitate transportation of cement, chemicals, food grains among other bulk cargo.

The company’s entry into the transportation segment of logistics sector is part of its plan to widen presence in downstream business, which insulates Hindalco from vagaries of commodity prices.

Logistics cost in India is at around 14 per cent at present. This is much higher than Japan’s 11 per cent and US’ 9-10 per cent. Of this, transportation and warehousing makes majority of the logistics cost.

For Hindalco, aluminium trailers alone represent a business turnover estimated at around Rs 500-600 croe with 50 per cent adaption. The annual Indian trailer production is estimated to be around 20,000 units per annum. The trailer market in India, though cyclical, is expected to grow at a rate of 10-12 per cent annually.

Initially, the company will provide trailers for group company Ultratech Cement, to help them reduce logistics cost.

The trailer is being engineered with inputs from Automotive Research Association of India (ARAI), informed Pai.

In order to build these bulkers and trailers, Hindalco is working jointly with the fabricators across country, supplying aluminium chassis, imparting training and expertise along with technology know-how to help smooth adaption of the products in the domestic market.

“The initial investment for the transporter is 40 percent higher than the mild-steel trailer. However, the life cycle of aluminium trailer is nearly four times higher and payback will be less than two years,” said Jay K Mulchandani, managing director of Core B Group, one of the fabricators working with Hindalco said.

Going ahead, the company also aims to look at building smaller electric vehicles for last mile delivery purpose, a crucial part of the logistics chain, which can improve operational efficiency in the system.

“The trailer product also has huge scrap value which is 70 percent higher than that of mild-steel trailer. This makes the product more attractive as it can be sold off to Hindalco itself which can recycle the unit,”  informed Gagan Maheshwari, managing director at Kamal Exim Pvt Ltd, who is using the new product for the Ultratech plant in Rajasthan. Maheshwari aims to now replace his entire 45 vehicle fleet to aluminium trailers.

Higher presence in downstream products has given Hindalco an edge over its peers NALCO and Vedanta who are more into primary aluminium products. The company is already present in other downstream sectors such as packaging and is also looking to enter the construction segment soon.