In some ways, he is a serial entrepreneur, apart from leading Apollo Tyres’ international trading. After dabbling in online gaming (lotteries) and digital cinema (UFO Moviez), Raaja Kanwar, eldest son of Apollo Tyres’ chairman, Onkar Singh Kanwar, has now zeroed on the logistics business. In an interview with Ranju Sarkar, he explains the move’s rationale and how he plans to differentiate and grow the business. Edited excerpts:
Why did you want to get into logistics? What’s the opportunity?
Apollo International, which is into international tyre trading, has 20 people in China. When we visit China and come back, we realise the yawning gap in infrastructure between the two countries. We looked at the spaces within infrastructure and zeroed in on logistics; the other areas are crowded or have some policy confusion. Logistics was and will continue to be the need of the country. We need to buy goods, distribute these at the right time and at the right place. Logistics seemed like a good space to get in. There’s a huge need for companies to outsource logistics.
We started with dry ports, which are very close to existing ports, new ports and land-locked ports. We have set up our first container freight station (CFS) at Panvel, next to JNPT (at Navi Mumbai). We plan to set up 9-10 container freight stations... Because of congestion at Indian ports, there’s need for dry ports, where containers can come in, get de-stuffed, the goods get customs-verified, all paper work is done, and the cargo goes. Similarly, cargo comes from a company’s factory to the CFS, gets processed and is shipped.
This is a very hardcore, ground-level business. We wanted to get our hands wet with it, understand what logistics is all about. We have been in business for the past 10 months, brought in good people, and built in a team. There are three-four corporate players, including Allcargo Global Logistics Ltd, Gateway Distriparks Ltd. There is room for many more. The retail boom is kicking in, new ports are coming up but a majority of the logistics operators are mom-and-pop shops. There’s decent space to play.
What are the key success factors and dynamics of the business?
It’s a very capital-intensive business. You need to buy 40-50 acres of land to set up a CFS, depending on the port. So, at one level, it’s a real estate play. We have bought 50 acres in Panvel, but have developed only 17 acres. The rest is earmarked for future expansion in temperature-controlled facilities, third-party logistics. A CFS or ICD (inland container depot) is the first in the bigger scheme of things. We would like to have a networked logistics park, pan-India presence. The first CFS at JNPT is our flagship; we had to prove our worth.
How do you plan to differentiate in what looks like a crowded market?
In Apollo, we have the backing of a good brand. We are working with a software firm to create an IT (information technology) solution, which is not off-the-shelf stuff, but looks at the needs of the logistics industry. We have managed to rope in good people in our team, 90 per cent of the shipping lines are giving us business and we have turned cash-positive. Next, we will be looking at opening centres (CFS/ICD) in Kerala and Tamil Nadu.
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The critical success factors in this industry are the capability to acquire land, closing a deal and ensure strong operations, so that the turnaround time for cargo is minimum. Efficiency is the key. So, we have good people on the ground. In the service industry, you want to ensure you don’t make a mistake and earn a bad name.
What were the financial assumptions when you mooted the venture?
We have invested around Rs 120 crore till date in the venture, which includes debt of Rs 55 crore. We plan to invest around Rs 20 crore this year and achieve revenues of Rs 1,200-1,300 crore in the next three-four years. We hope to break even in the next three to five years, while the project should deliver an internal rate of return of 20-25 per cent.
What’s the road map for growth?
In the next three-four years, we would like to have a pan-India presence; we are in the process of identifying land, identifying ports, what kind of shipping lines will come in. We started with the West; now we are keenly looking at Kerala-Tamil Nadu.
We would also like to explore options for inorganic growth. If there are any good mom-and-pop shops available, we would be keen to acquire. This will help us scale up.
We would like to get into third-party logistics, and scouting for a partner and develop a niche — like, say, specialising in transport of white goods. Right now, most companies are managing on their own or work with four regional operators or 12 different logistics operations, who don’t talk to each other. Companies want to deal with one pan-India operator, who can manage their back-end. Many companies have invited us to study their supply chain and if we can save costs, they are willing to share the gains.
We would like to rope in, say, a third-party logistics company from, say, Germany, who understand the game and have the expertise in the business process, systems and brings in the people to run the business. I am not looking to reinvent the wheel.
Is your business model inspired by some company?
Our model is still evolving. In India, you have ICDs because of the way our ports are (congested, inefficient). Abroad, all this is handled by ports. For us, the next thing would be to get into temperature-controlled facilities. It’s a good play.