Gateway Distriparks may buy logistics firms

Gateway Distriparks, the shipping-logistics provider part owned by Temasek Holdings, may seek acquisitions as new entrants struggle to achieve the scale needed in the world's second-fastest growing economy.

"There will be a lot of consolidation fairly soon and some of them may merge,'' Gateway Distriparks Chairman Gopinath Pillai said in an interview yesterday in Singapore. There's "very stiff competition from a lot of new players.''

Railway Minister Lalu Prasad Yadav opened up some functions of the state-run Railways monopoly for the first time to private companies for running container trains, building lines dedicated to freight, upgrading stations and setting up warehouses and logistics centers.

The changes have led to about a dozen private companies entering the rail logistics and freight business, not all of which may survive, Pillai said. "The container business can handle three or four big players," he said.

"The rest of it, in trains for instance, I can't see more than two or three players.'' Gateway rose Rs 3.30, or 2.23 per cent to Rs 151.25 on the BSE.

The stock has fallen 9.1 per cent this year, compared with a 47 per cent advance in the Sensitive Index. Gateway would consider expanding through acquisitions but was not in talks with any companies currently, Pillai said.

"You have to see how business fares,'' he said. "Until they start losing, no one would talk about merger or selling.''

Gateway has warehouses near the ports of Mumbai, Chennai, Vishakhapatnam and runs container trains from the hinterland to various ports of the country. Acquisitions would allow the company to add business on busy routes.

"Increased rail services will open up huge opportunities for the company,'' said Parul Patel, an analyst with ASK Securities India in Mumbai. "An acquisition could give it a readymade land bank at strategic locations on important trade routes.''

Gateway, which has invested Rs 200 crore ($51 million) in the rail business through its subsidiary, expects revenue from its joint venture depot with state-run Container Corporation of India by the second quarter of next year.