A PROJECT REPORT

ON

“CONDUCTING INDUSTRY RESEARCH TO

IDENTIFY THE INDUSTRY TRENDS AND VALUING
THE EQUITY OF THE LEADING PLAYER IN THE
INDUSTRY”

SUBMITTED BY

Mr. SUJAY PRAKASHCHANDRA SOMANI

MBA++ FINANCE

UNDER GUIDANCE OF

INTERNAL GUIDE EXTERNAL GUIDE

PROF. ANIL AGASHE MR.HARSHAD DESHPANDE
FACULTY,DMS CEO, CONSCI

UNIVERSITY OF PUNE CONSULTANCY PVT LTD

IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE

AWARD OF DEGREE OF MASTERS IN BUSINESS
ADMINISTRATION

DEPARTMENT OF MANAGEMENT SCIENCES

UNIVERSITY OF PUNE
(PUMBA)
2009-11
 Project report

Department of Management Sciences (PUMBA)

University of Pune

CERTIFICATE

This is to certify that the Summer Project titled “Conducting Industry Research to
identify the industry trends and valuing the equity of the leading player in the
industry” carried out at Consci Consultancy Pvt. Ltd,Thane,Mumbai has been
submitted by Mr Sujay Prakashchandra Somani , 2nd year MBA Finance student of
the Department of Management Sciences, University of Pune (PUMBA), towards
the partial fulfilment of the requirement for the award of the Masters in Business
Administration (MBA) and the same has been satisfactorily carried out under the
guidance of Prof Anil Agashe during the academic year 2010 - 2011.

Prof Anil Agashe External Dr B. V. Sangvikar

Faculty Examiner Head of Department
PUMBA PUMBA

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ACKNOWLEDGEMENT
Summer internship is a great practical experience which helps to apply the theoretical
knowledge and get acquainted with the business world. For this purpose many people help
the interns to make it an experience of life time.
I would like to express my sincere gratitude to Mr.Harshad Deshpande,CEO,Consci
Consultancy Pvt. Ltd,Thane,Mumbai for providing me this opportunity to work with their
reputed organization. I would like to thank Mr Ashwin Payal Consci Consultancy Pvt.
Ltd.,Thane, Mumabi for being my mentor and guide and helping me with his vast experience
for the of Project.

I would like to put forth my earnest thanks to Prof. Anil Agashe, Faculty, PUMBA for
playing an ideal mentor and being a constant source of knowledge throughout.
I would also like to thank Dr. B.V. Sangvikar, HOD, Department of Management Sciences,
University of Pune for giving such an opportunity.

Sujay Prakashchandra Somani

Roll No. 9152

Executive Summary:

Indian economy today is providing various investment opportunities especially with the
booming industry and whopping government spend on infrastructure. Logistics is a priority
for, presently the movement of goods in the Indian market is very slow as compared to the
other economies in the world. And we find steps taken by the Government of India so as to

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reduce it in near future with plans for implementation of GST and development of
infrastructure.
Our project is based on Fundamental analysis. Firstly we view the international Economic
scenario where USA is recovering from the financial turbulence and few shaky incidences in
the European economy. Indian economy due to its strong domestic market and impetuous on
savings wasn’t affected badly and we found just a slight slowdown in the economic growth.
Further we take a look in the Logistics sector. It has a direct correlation with GDP of the
country, where most of the papers calculate logistics sector as a percentage of the GDP.
Indian logistics sector is less efficient since it is unorganized in nature and Government rules
deter smooth movement of goods. But we expect share of organized players to grow in the
near future and Government supportive with plans for introduction of GST and infrastructure
development.
Further various listed companies were reviewed and TCI was selected for our study, since it
has presence in the market since 1958 and has pan India coverage. Also it has major presence
in all segments of Logistics sector.
TCI-Transport Corporation of India has its major revenue with Freight followed by XPS, and
is expanding majorly in Supply chain and Warehousing. Their revenues were projected
considering the Historical data and the trends in various segments coupled to company
strategy and caapability.
After projection of revenues and calculating anticipated profits and projecting Balance Sheet
and Cash Flow statement, FCFE method was used so as to calculate the price of the security.
The interest rate of 20 years Government Bond is taken as risk free interest rate. And 7% as
risk premium for the security. The beta is taken from reuters database and is 1.5.

Contents
Executive Summary:.................................................................................................................4

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Company Profile:.......................................................................................................................7
Economic Analysis.....................................................................................................................8
International Economy:.....................................................................................................................8
Oil Prices:.......................................................................................................................................8
USD-INR Exchange rate scenario:..................................................................................................9
Indian Economy:................................................................................................................................9
GDP:...............................................................................................................................................9
Inflation in India:..........................................................................................................................10
IIP Index of Industrial Production:...............................................................................................11
Sectoral Analysis:.....................................................................................................................13
The Logistics Sector: Definition:.............................................................................................13
Overview......................................................................................................................................13
Investment Argument..................................................................................................................14
Segments of logistics:......................................................................................................................15
Express Cargo Industry....................................................................................................................15
Transportation segment:.............................................................................................................16
Seaways:......................................................................................................................................19
Warehousing:..............................................................................................................................20
Growth drivers for outsourcing logistics solutions..........................................................................21
What was wrong AND What has changed.......................................................................................21
Company Analysis:..................................................................................................................23
Logistics Indian Peers.......................................................................................................................23
Company Background......................................................................................................................26
Business of company:......................................................................................................................28
MAJOR HIGHLIGHTS OF FY 2009-10:...............................................................................................29
Five Forces Model for TCI:...............................................................................................................31
SWOT ANALYSIS OF TCI:..................................................................................................................32
FUTURE OUTLOOK FOR FY 2010-11:................................................................................................33
Valuations and Recommendations...........................................................................................34
Stock performance..........................................................................................................................34
Forward rolling band charts.............................................................................................................35
PROJECTIONS:..................................................................................................................................36
Balance Sheet:.................................................................................................................................37
Profit and Loss Account:..................................................................................................................37

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Cash Flow Statement:......................................................................................................................37

FCFE:................................................................................................................................................37
Analysis:...................................................................................................................................38
Recommendation:....................................................................................................................38
References:...............................................................................................................................39

Company Profile:

Consci Consultancy Pvt. Ltd is a start-up firm started by passionate team comprising of
young individuals with backgrounds in Science, Engineering, Management, Costing,
Accounting, Law, etc.
The company is into following business;

Industry/ Company Analysis: Competition analysis, market share analysis, differentiation,

financial analysis, growth analysis, equity analysis, etc.

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Financial Projections: The company helps organizations to project the financials helping
them prepare for raising funds.

Special Research Reports: The company works in collaboration with the research houses,
fund houses, PE players to do a focused and in depth research on specific areas. We ensure
that our clients get clear insights helping making them their investment decisions.

Fund Raising: The company works for raising funds for individuals or companies by Debt or
Equity.

Training: The company undertakes training programs for students viz.. Equity Research
Workshops, Economic Establishments & Markets, Portfolio Management, Introduction to
IFRS, Understanding Credit Rating Process, Annual Report Reading and add value to the
students with their experience.

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Economic Analysis
International Economy:
The international economy faced a financial turbulence due to collapse of financial
institutions in the US. This impacted the Indian economy in three ways:-
First: The financial channel was affected, which reduced the ability of Indian companies to
mobilize equity and debt in the foreign market. Erosion of risk appetite resulted in lenders
being reluctant to lend.
Second: Erosion of import demand in the developed economies and the dislocation in trade
finance and related markets which resulted in a sharp decline in the external demand for
Indian exporters.
Third: Collapse of business and consumer confidence.

Oil Prices:
The oil prices have hovered around 65-70 USD per barrel in summer of 2009. Despite of the
recession the world demand of oil is 84.3 Mn Barrel/Day which is 2.1% less than previous
year and 1.4% less than 2007 demand.

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Yea
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
r
201 77.5 76.2
80.86 84.86 72.68 75.33 72.14          
0 1 0
200 42.3 40.3 75.5 76.6 74.1
48.80 51.66 59.23 69.80 65.54 71.27 68.84
9 7 5 5 4 9
200 92.9 95.3 105.7 112.9 125.6 137.0 135.6 116.8 104.7 75.0 55.6 39.6
8 7 8 1 0 2 6 3 2 1 8 1 7
* The table above displays the monthly average
Source: http://www.tradingeconomics.com/Economics/Commodities.aspx?
Symbol=CL1#ixzz0t5dF5000
With the deregulation of the petrol and diesel prices. The price of crude in the international
market would play a vital role in Indian economy especially with respect to the profitability
and cost of various goods. Note to be taken is that the price of petrol and diesel are
deregulated but still the taxes are same causing a double burden.

USD-INR Exchange rate scenario:

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We see depreciation in the Indian rupee in year 2008 and 2009. From mid 2009 slight
strengthening of rupee is observed.

Indian Economy:
GDP:
We talk about the economy; Indian economy grew at 6.7% of GDP for the year 2008-09.And
is expected to grow at a rate of 7.2% for FY 2009-10. (Budget 2008-09)
GDP growth rate Q-on-Q:

GDP growth rate

Y-on-Y:

The size of the

Indian economy is 1.3Trillion USD.

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The agriculture sector is supposed to show negative growth of 2%.

The manufacturing sector grew at a slower pace in 2008-09 at 5.3% due to slower pace of
export demand , higher interest cost and rise in material and energy cost.

Inflation in India:
Rising inflation and that two a double digit since sept-oct 09 is a matter of great concern.
Also the iip data shows double digit growth rate since sept-oct 09. Thus the demand side
seems to heavy as compared to the supply side.

Yea Ju
Jan Feb Mar Apr May Jul Aug Sep Oct Nov Dec
r n
201 16.2 14.8 14.8 13.3 13.9
0 2 6 6 3 1              
200 10.4 9.2 11.8 11.7 11.6 11.4 13.5 14.9
9 5 9.63 8.03 8.7 8.63 9 9 2 4 9 1 7
200 7.6 10.4 10.4
8 5.51 5.47 7.87 7.81 7.75 9 8.33 9.02 9.77 5 5 9.7
200 5.6
7 6.72 7.56 6.72 6.67 6.61 9 6.45 7.26 6.4 5.51 5.51 5.51
200 7.8
6 4.39 5.31 5.31 5.26 6.14 9 6.9 5.98 6.84 7.63 6.72 6.72

IIP Index of Industrial Production:

The general index of iip numbers stand at 316.7 with respect to the base year 1993-94 which

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is 17.6% higher as compared to the April 2009.

The indices for the industrial production (iip) for the Mining, Manufacturing, and electricity
sector for the month of April 2010 stands at 11.4%, 19.4%, and 6.0% as compared to April
2009.

Source: www.moisp.org.in .
The sectoral growth rates in April 2010 over April 2009 are
8.8% in Basic goods, 72.8% in Capital goods, and 10.8% in intermediate goods;
The consumer durables and consumer non-durables have recorded growth of 37% and 6.6%,
with overall growth in consumer goods being 14.5%.
(iip data www.mospi.org.in/mospi_iip.htm)
India industrial production data:

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The Financial turbulence had hit the Indian markets thus we see –ve growth rate of 0.2% in
Jan 09. The Indian markets seem to have recovered with continuous +ve trend in iip data. We
see double digit figure from sept-oct 09 onwards which is a good sign.

Sectoral Analysis:

The Logistics Sector:

Definition:
Logistics is the management of the flow of goods, information and other resources between
the point of origin and the point of consumption in order to meet the requirements of
consumers. Logistics involves the integration of information, transportation, inventory,
warehousing, material handling, and packaging, and occasionally security. Logistics is a
channel of the supply chain which adds the value of time and place utility.

The Global logistic sector size is $3.5Trillion.

For any country the annual logistic cost comes to around 9-20% of the GDP.
For US it comes around 9% of the economy.
The Indian logistic industry comes to around 13% of the GDP which translates into $125Bn.
(Lugano conference-Logistics Industry by: Subrata Mitra).
This indicates the level of inefficiencies of the Indian logistics sector.
Also the Indian logistic sector is lot complex by way of volumes, scale and geographic spread
of operations.
Few of the methodologies used to address these complexities are:-
Integrated logistics solutions to help create efficiency.

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Efficiency through route optimization for hub and spoke model.

Milk run and line haul route optimization for road transport.
Efficient benchmarking and optimal resource deployment in logistics operations.
The logistics industry contains many operations which are manpower intensive and thus
planning for manpower temporary and permanent is a critical element to be addressed.
Overview
           With the changing economic scenario, factors such as globalization of markets,
international economic integration, removal of barriers to business and trade and increased
competition have enhanced the need of transportation. It is one of the most important
infrastructure requirement which is essential for the expansion of opportunities and plays an
important role in making or breaking the competitive positioning.
           Transport volumes in India remain much less than those in the developed countries.
India has still to go a long way in strengthening its transportation network. The countries
transportation network suffers from several inadequacies and, in particular it has little
resilience to deal with unforeseen demands.
           Transportation, like all industries is largely influenced by information and
communication technologies with the focus being on knowledge of customer needs and value
added services. Surface transport is provided by the Road and the Indian Railways (primarily
for carrying low value bulk commodity, mostly for the government sector). Cargo Road
Transport is entirely in the hands of the private sector. An estimated 1.2 million trucks (9 tons
capacity) crisscross the country covering more than 80,000 kilometres of roads. In India road
transportation is preferred for cargo movement, where flexibility of routing assumes
importance. It facilitates door-to-door delivery, overcoming unnecessary delays which
normally take place in the other modes of transportation.
Investment Argument
India’s logistics market is at an inflection point with the organised sector likely to witness a
25% CAGR as players offer cost effective, end-to-end integrated logistics solutions.
Lower logistics outsourcing drives inefficiencies
The development of India’s logistics companies has lagged behind their global peers, as is
reflected in logistics costs being high at 13% of GDP (other countries logistics costs at 8-9%
of GDP), mainly due to lower outsourcing of logistics functions by corporate. The lower
outsourcing, in turn, is due to a multi-layered tax system, lower manufacturing outsourcing
and poor infrastructure. However, demand for integrated logistics solutions is growing

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rapidly, as significant investments are being made in infrastructure and move towards
implementation of GST. Moreover, the trend for higher manufacturing outsourcing is further
driving the demand for logistics outsourcing.

Current Industry Dynamics:

Segments of logistics:

Express Cargo Industry

Need
           In today's business big or small , domestic or global, the value of time is clearly
immense. Business today is focusing on how it can deliver goods and services to global
markets in a timely and reliable manner. Besides efficiency in pick up , timely delivery ,
timely information and availability of other infra structural facilities for efficient handling
of cargo transportation have become the need of the day. In other words prompt customer
service is what gives competitive edge to the players of the cargo transportation industry in
today's rapidly changing environment. It was this need which stimulated the growth of the
express cargo industry worldwide.
           The express cargo industry is judged primarily on the following key parameters :

Speed of distribution

World wide service

Security and reliability

Value added Service

Customer care
           To meet the above needs , the express industry is developing effective use of

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information technology, which forms the backbone of the industry. Right from the pickup
point, the precise status of the consignment needs to be monitored at every stage of its
journey. Secondly the use of multi modal services assumes importance in order to provide
turnkey solutions to the customer. Also, guaranteed timely delivery gives the required
confidence to the customer to reduce his inventory positions at various levels of
distribution.
Sector-wise Market Share- Express Cargo

Express cargo can be segmented in four categories as Organized Sector, which operates in
domestic as well as international markets, semiorganised sector, unorganized sector and
EMS speed post, which is express arms of the postal department (Refer Fig.1).

(Source: Transport India 2000)

Transportation segment:
Freight handled by different segments:

In Mn 2006 2007 2008 2009

Tonnes
RAIL 667 728 794 850
ROAD 1353 1478 1612 1726
SEA 424 464 519 530
AIR 1.4 1.55 1.71 1.7
TOTAL 2445.4 2671.5 2926.7 3107.7
5 1
IN % Increase 9% 10% 6%

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RAIL 27% 27% 27% 27%

ROAD 55% 55% 55% 56%
SEA 17% 17% 18% 17%
AIR 0% 0% 0% 0%

Source: SSKI RESEARCH.

We find a steady increase of total freight and individual segments at 9-10%. And similar
increase is expected in coming years. For the year 2009 is justified due to the financial
turbulence in the international market and collapse of major banks in the USA.
Over all maximum of the freight is carried by the road. Next is the rail. Seaways handle a
sizable chunk. Air freight has negligible presence due to the high cost. It is primarily used
for courier service.

Indian Road Freight Industry

Organised Vs. Unorganised Sector

The road freight industry stands out unique with the majority of the market share held by
the unorganized sector. Out of the entire market size of approximately Rs. 38,000 crores,
Rs 6000 crores is with the organized sector and the remaining with the unorganized sector.
Above Fig indicates that organized sector has only a miniscule 14%share of the total road
freight transportation industry.

Transport through Railways:

Item Unit 1990- 2000- 2005- 2006-

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91 01 06 07
Freight-Tonnes
Originating Billion 0.34 0.50 0.67 0.73
Kilometres Billion 243.00 316.00 440.00 481.00
Earnings Rs. 82.47 230.45 355.35 410.92
Billion
Avg earnings per tonne per Paise 35.00 73.80 80.80 85.40
km.
SOURCE: Railway Board
The transport of cargo via railways is cheaper as compared to the roadways. But due to lack
of competition and lack of service road transport is still preferred over rail transport. It can be
seen by figures given table below. Road transport handles around 56% of the total freight.
One reason being the lack of door to door service.
In 2006 Govt. invited private players and 13 licenses were offered to private players to
provide cargo service. Thus in long distance routes using the hub and spoke model players
provide the first mile and last mile services along with railway services so as to utilize the
cost efficiency and provide the door to door service. But still the private players handle not
more than 3% of the total rail freight till date.

Privatization of the rail freight:

Along with Concor 13 companies have signed up for rail based services:-
Rs.50 crore route category:-
(all India operation, including JNPT to NCR)
Three Rs.10 crore route category :-
􀂾 JNPT/Mumbai to hinterland except NCR.

􀂾 Pipavav, Mundra, Chennai/Ennore, Vizag and Kochi with hinterland

􀂾 Kandla, New Mangalore, Tuticorin, Haldia/Kolkata, Paradip

and Mormugao with their hinterland

The 10 companies in the Rs.50 crore categories:
􀂾 Adani Logistics

􀂾 Central Warehousing Corporation

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􀂾 Concor

􀂾 Dinesh/ETA (Emirates Trading agency)

􀂾 Gateway Distriparks Ltd

􀂾 Hind Terminals (MSC Group), India Infrastructure &

Logistics (Joint venture of APL & Hindustan Infrastructure & Logstics)

􀂾 Reliance Energy Ltd (Anil Ambani group)

􀂾 SICAL Logistics.
The 4 companies in Rs.10 crores categories:
􀂾 Delhi-Assam roadways corporation ltd.

􀂾 Bothra Shipping

􀂾 JM Baxi & Co

􀂾 Pipavav Rail Corporation ltd.

Seaways:
The seaways are used for international cargo. Also India is getting developed as a hub for the
International cargo. We see that the major transport at the various ports is the overseas cargo.
very little cargo is moved as costal. But with development of various ports like Mundra and
JNPT with direct connectivity with Rail freight transport and licenses being provided to the
private players the share of seaways would increase in the near term.

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SOURCE: Transport Research Wing, Ministry of Shipping,Road Transport &

Highways
Warehousing:
It forms a major segment of the Logistics industry with 40 Million Sq.ft of space being cover
for warehousing.
This segment has come up due to three reasons;
development of retail sector,
escalating growth in the commodities market,
and change in consumer preferences from fresh to processed food.
Warehousing is growing at rate of 34-40% per annually and is expected to become a $55 bn
industry in next 3-4 years with more than 50Million Sq.ft of logistics space and 100 of

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logistics parks.
The creation of SEZ (FTZW), with tax benefits under section 80 IG of Income Tax Act.
Also various value added services have been developed to cater to the consumers.

SEGMENTS OF LOGISTICS SECTOR AND SEGMENT SCENARIO:

SOURCE: TCI Annual Report 2008-09

Table above give us an idea of the growth rate in individual segments and the industry
scenario.

Growth drivers for outsourcing logistics solutions

What was wrong AND What has changed

Infrastructure
Infrastructure bottlenecks led to higher transit time and higher costs
Investments of Rs8618bn in infrastructure help provide effective 3PL solutions
Taxation
Multi layer tax system prevents outsourcing of logistics functions Production & consumption
centres closer to each other, leads to low value addition from outsourcing Lack of integrated
logistics providers to service corporate
CST phase out to spurt demand for logistics outsourcing
Manufacturing outsourcing
Increasing global manufacturing outsourcing driving demand for logistics outsourcing
3PL providers
Increasing proportion of integrated logistics providers to service corporate Increasing
investments in technology encourages outsourcing (tracking ability improving)
Technology
Low investments in technology adds limited value from outsourcing (tracking ability low)
Increasing investment in technology (eg: GPS) has improved tracking ability to provide better
service to the customers.
Future expectations of market:
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From 2005-10 the logistics industry in India has grown at CAGR of 25%. In 2007 the size of
the industry was $100 Bn. And in 2010 the size of the industry is $130 Bn. Sand from 2010-
15 the logistics industry is expected to grow to $385 Bn.
The share of the organized players would also increase from 6% in 2007 to 12% by 2015.
Thus we would witness a major mergers and acquisition in the industry.

Deregulation of petrol and diesel prices:

The deregulation of petrol and diesel prices in last week of June has increased the price by
3.73 Rupees for petrol and slightly above 4 Rupees
for diesel. And also the private players can link the petrol price to the international crude oil
prices while for govt. companies they have to strictly average out for 15 days and can change
prices on fortnightly basis.
This has led to an increase in freight charges by 10%. No effects in the short term are noted,
but it might have an impact in long term.
Especially it would increase the cost of goods and reflect in the inflation. How far will it
hamper the growth is to be seen. Also variation in petrol and diesel prices can change costing
and affect profitability.

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Company Analysis:
Logistics Indian Peers

SALES T SI ESS S PI SHR CON AE ALL G C

C C AR C L EYA COR GI CAR A W
I A I L S S GO TI C
L
SIZE IN Rs Cr
ROAD 24 6 24 28 122 30 313 51
70 9 4 3 0 8
0
RAIL 34 1 3417 50
68
SEAWA 62 6 218 3 24 150 93
YS 49 7 7 7
2
7
AIR 0
CARGO
XPS 34 3
7 4
7
SCS 16 1
8 6
8
COLD 0

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CHAIN
WAREH 81 23 85 7 48
OUSING 5 7 6
GLOBA 42 1 27 387
L 4 1
MISCEL 23 21 21
LENEO 6 5
US
TOTAL 14 1 52 257 3 28 146 3417 38 463 61 75
17 2 9 4 7 3 5 8 1
6 8 2
2 7

Source: Data compiled from annual reports (FY 2007-08) of above companies

TCI is No.1 in Revenue Size in Road Freight segment and has presence in all major
segments.
Revenue- A comparison Segment wise and overall of listed companies
Thus we select TCI as our company for study. For iy has presence in all the major segments
in the logistics industry. And also its revenue is comparable and large as compared to other
peers in India.

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K ey d at a
S ect or Logistics
MARKET C ap 9.84 Bn
52 Wk H/L ( Rs) 14 2.80 /62 .65
Av g. daily vol. 264.99
( 6 mon th) in lacs
( NS E)

B SE C ode 532349
N SE C ode INE688A01022

Bl oombe rg TR PC @I N
R eut ers TC IL. NS
 

Sensex 17977.86
Nifty 5399.35

TCI Vs Nifty

Shareholding pattern (%)

Jun 2010 Mar 2010
FIIs 6.58 6.50
MFs and institutions 0.05 0.52
Promoters 68.76 68.76
Others 24.61 24.22

Absolute returns (%)

1 mth 3 mth 12 mth
Stock 10.3 4.82 81.1
NSE NIFTY 4.45 1.21 23.8
BSE Logistics

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Annexure 1

Company Background

TCI - key beneficiary of the logistics boom…

TCI, established in 1958 as a trucking company as one man, one truck, one office,
it is one of the largest integrated logistics company in India today providing pan India
coverage,
and a one-stop shop for all cargo transportation services solutions,
including logistics management, transport management, warehousing services, inventory
management and supply chain management for all types of cargo, primarily through surface
movement.
It has its international presence through subsidiaries and joint ventures in Singapore, Hong
Kong, Thailand, Mauritius, Indonesia, China, Germany and The Netherlands.
It has a great reputation in the market.
Asset base:-
8.25 Million sq.ft of Warehousing space.
Five,cargo ships.
Operating,7000 trucks and trailers. 1200 owned.
1200 fully computerized offices with pan India presence.
and a strong work force of 6500 employee and 20000 strong outsourced team in Indian and

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abroad.

8000 TRANSPORT DIVISION

7000
6000
5000 XPSDIVISION
4000
3000
2000
SUPPLY CHAIN
1000 SOLUTIONS DIVISION
0
2008-09 2008-09 2009-10 2009-10
revenue income revenue income
TCI SEAWAYS

REVENUE CONTRIBUTION FROM THE VARIOUS SEGMENTS FOR FY 2009-10:

Thus TCI handles 12%(Rs7200Mn)of total organized road freight(Rs60000Mn).

The XPS division provides on 1/4th (Rs3860Mn) of the revenue and contributes to 1/3rd of
total profits.

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PROFIT CONTRIBUTION FROM VARIOUS SEGMENTS FOR FY2009-10:

Business of company:

TRANSPORTA COAST TO
FY 2009-10 TION XPS SCS COAST OTH
SERVICE BULK TIMELY DISTRIBUT OCEAN AND FUE
TRANSPORTA AND DOOR ION, C&F, COASTAL PUM
TION- TO DOOR WAREHOU FREIGHTM, AND
FTL,LTL,ODC, SERVICE- SING, STEVEDORIN POW
RAIL (SURFACE,A COLD G
IR, CHAIN ,

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COURIER,
GLOBAL,
CUSTOM VALUE
CLEARANC ADDED
E) SERVICES)
CEMENT,
FOODGRAINS, INBOUND/
STEEL AND UPTO 50KG OUTBOUN TIMBER,WO
CARGO CONTAINERS CARGO D OD NUTS PET
HANDLED ETC COURIER SERVICES ETC POW
BAJAJ,
HLL,
TELCO,
MUL,
IT, NOKIA, Dr.
PHARMA, REDDY, RET
AUTO, INDO CORPORATE COR
CLIENTS CORPORATES RETAIL ETC RAMA ETC S TES
REVENUE 7273.5 3860.4 2942.1 634.4
AS % OF
WHOLE 48% 25% 19% 4%
NPM 285.7 301.1 220.7 83.2
AS % OF
WHOLE 32% 33% 24% 9%
OPM% 4% 8% 8% 13%
CAPITAL
EMPLOYED 1904.36 1352.17 1226.38 773.48
AS % OF
WHOLE 30% 21% 19% 12%
ROCE 15% 22% 18% 11%
EMPLOYEE 2200 2500 1100 115

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Source: Audited financial result 2009-10 of TCI. & SSKI RESEARCH.

Thus most of the clients of TCI are corporate. And TCI provides customized solutions to
most of these corporate. We can get to know about this fact from the 2006-07 report where
they have mentioned a Bajaj case study. Thus repeat business from the customer is a source
of revenue.
So as to take advantage of cheap rail transport, TCI has ventured into a JV with CONCOR
(TCI 51% + CONCOR 49%) to form a Infinite Logistics Solution. This would have
benefit to customer in form of:-
Rail Road cargo movement,
Establishing synergy between Two Rail And Road,
JV company to provide end to end multi modal solutions.
This would Freight segment increase its net profit margin.
It will also help sustain growth pattern in TCI freight segment.
MAJOR HIGHLIGHTS OF FY 2009-10:
New clients acquired for TCI Freight during the FY 2009-10 are:-
TATA NANO, GM, NITCO, HERO HONDA, SAMSUNG.
This would enhance their fixed revenues.
Addition of 0.75 Million of Warehousing space in the year.
In cold chain, TCI caters to various Pharma, Foods and Chemicals by reefer vehicles.
TCI is looking for aggressive growth in Supply Chain Solution in the Year.
TCI SEAWAYS:
Due to rising fuel and manning cost the profitability of the TCI SEAWAYS has come down.
Also Break Down of one of the ships incurred an additional cost of Rs. 2.5 Cr. Thus the
overall profitability of TCI SEAWAYS has gone down for the FY.

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Five Forces Model for TCI:

Threat of new entrants – Low Bargaining Power of Suppliers – Medium

stry since it is requires reach across geography, heavy initial investment, economy of scale, industry relations, expertise,
Petrol and
and
Diesel
requires
being
labor.
one the key input
The company stands as a proce taker, while labor and machinery are available, it has ability to barg

Inter-firm Rivalry – High

With many players the rivalry is high. But due to long standing relations with corporate, help retain market. With retail the competetion is very high especially in xps segment.

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Bargaining Power of Buyers – Low Threat from Substitutes – Low

ting margins are as low as 4%, and with rising petrol and diesel prices, Buyers For
are Road-Rail
in state of is
price takers. with its own limitations. It has to still depend for first and last mile services
a substitute

SWOT ANALYSIS OF TCI:

Strengths
Strong domain focus.
Upgraded technology.
Pan India presence with 1200 fully computerized offices which covers 99% region of India.
Strong and experienced management and Employee workforce Opportunities
Warehousing especially with retail boom.
Opening of rail transport to private players.
Expanding Indian Economy.
Need of organized logistics providers.
Expansion in SEAWAYS.

SWOTfor Transport Corp> of India

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Weaknesses Threats
It hasn’t forayed in the rail cargo which is cheaper. Deregulation of petrol prices would tip off the profitability.
 Rail cargo especially with entry to private players.

Project report

FUTURE OUTLOOK FOR FY 2010-11:

TCI FREIGHT:
The company has stable revenues through clients like BAJAJ, HUL, MUL, TELCO, Dr
REDDY’s, TATA NANO,GM, NITCO, HERO HONDA, SAMSUNG and tie ups with
various other players. Thus this segment of the company will keep growing at a steady pace.
The OPM % of the segment is very low with makes the company most suitable for
outsourcing for the other companies. Also the recent tie up with CONCOR to provide
multimodal cargo service would give fruits in future.
TCI XPS:
It contribution to revenue is 2nd largest and contribution to Profits is highest with 8% OPM.
TCI is increasing its revenue in the segment and is looking for aggressive growth so as to add
to the bottomline. Also the segment is showing growth.
TCI SCS:
TCI is continuously increasing its warehousing space and providing specialized services to
the various Pharma and foods and chemical companies which is a growing segment.
TCI SEAWAYS:
TCI is increasing its presence in the SEAWAYS slowly and is set to achieve growth; but this
would take time before it gets implemented, due to lack of experience.
Thus in FY 2010-11 we would see increasing share of TCI XPS in the revenue, Thus
increment in the profit. TCI FREIGHT is expected to grow at 12%; TCI XPS is expected to
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grow at 25%; TCI SCS is expected to grow at around 30%; TCI SEAWAYS is expected to
grow at around 10%. TCI PAT is expected to grow at least at 24% over the previous year’s
growth of 52%. For revenue it would follow the growth pattern of the previous year.

Valuations and Recommendations

Stock performance
Transport Corporation of India
Absolute Performance From 10th JAN’10

TCI
160
140
120
100
80
60 TCI
40
20
0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
n/1 n/1 b/1 b/1 b/1 b/1 r/1 r/1 r/1 r/1 r/1 r/1 r/1 r/1 y/1 y/1 y/1 y/1 n/1 n/1 n/1 n/1 n/1 l/1 l/1
a a a a p p p p a a a a u u
0 /Ja 8/Ja 4/Fe 0/Fe 8/Fe 5/Fe /M /M /M /M /A /A /A /A /M /M /M /M 2/Ju 9/Ju 6/Ju 3/Ju 0/Ju 7/J 4/J
6 3 1 8
2 2 0 1 1 2 05 1 2 1 9 29 0 1 2 2 0 5 1 2 19 2 6 0 0 1 2 3 0 1

Relative Performance NIFTY From 1th JAN ‘10

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NIFTY
5600
5400
5200
5000
4800 NIFTY
4600
4400
4200
1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 10 10 1 0 1 0 1 0 10 1 0 1 0 1 0 1 0
an/ an/ an/ an/ eb/ eb/ eb/ ar/ ar/ ar/ pr/ pr/ pr/ pr/ ay/ ay/ ay/ un/ un/ un/ un/ Jul/ Jul/ Jul/ Jul/
/J /J /J /J /F /F /F M M M /A /A /A /A M M M /J /J /J /J 6/ 4/ 2/ 0/
04 1 2 2 0 29 06 1 6 24 05 / 1 5 / 2 3 / 0 1 12 2 1 2 9 07 / 1 7 / 2 5 / 0 2 1 0 1 8 28 0 1 2 3

Thus we see the movement of TCI in accordance with the NIFTY stock.

Source: nseindia.com

Forward rolling band charts

Transport Corporation of India

PE P/BV
8.00
60.00
50.00 6.00
40.00
30.00 PE 4.00 P/BV
20.00
10.00 2.00
0.00
0.00
0 6 0 7 0 8 0 9 1 0 1 1
5- 6- 7- 8- 9- 0-
8

9
6

0 0 0 0 0 1
-0

-0

-0

-0

-1

-1

20 20 20 20 20 20
05

06

07

08

09

10
20

20
20

20

20

20

MARKET CAPITALISATION; NET

SALES; NET PROFIT

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PROJECTIONS:

All figures in Million `:

60000.00
50000.00
40000.00
30000.00 FREIGHT
20000.00 XPS
10000.00 SCS
0.00 SEAWAYS
TOTAL

PROJECT SALES IN GRAPHICAL FORM:

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3500.00
3000.00
2500.00
2000.00
1500.00
1000.00
500.00
0.00

PROJECTED PROFITS IN GRAPHICAL FORM:

25.00%

20.00%

15.00%
ACTUAL SALES
10.00% GROWTH/GDP GROWTH
EARNINGS RETAINED
5.00%
ACTUAL SALES GROWTH
0.00%

RATIOS

20

15

10

-5 % GROWTH IN GDP QOQ

-10 % GROWTH IN SALES TCI

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Thus we see Cyclic trend in the year long sales of the TCI.

25.00%
%
20.00% GROWT
H IN GDP
15.00% YOY
%
10.00% GROWT
H IN
5.00% SALES
TCI
0.00%
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Thus there is slight correlation in the GDP and Sales Growth of the
company.

Balance Sheet:
Profit and Loss Account:
Cash Flow Statement:
FCFE:

Analysis:
The company Transport Corporation of India is doing good and would be a key beneficiary
of the Economic growth and consolidation of the logistics sector.

But the stock is over priced at the RFR 8% and Risk Premium of 7%.

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Also the Beta of the stock is high at 1.5, which reduces the value of the stock.
The Logistics sector is highly dependent on GDP, and the sales and overall logistics sector
has a very high correlation with the GDP of the country. This may be the reason for the high
Beta; since the world has undergone a financial turbulence and Indian economy is also
coupled to the world economy.

Also TCI is a firm at national level, thus global markets affect the sales of TCI for the
domestic demand is catered by the unorganized sector.

The JV with CONCOR if it increases the profit margin of TCI would affect the valuations.
But the operations are yet to start.

If the SCS and XPS operations sustain the profitability and reduce the Beta, still it would
affect the valuations.

Recommendation:
Wait and watch is the recommendation. Also let the price correct before investing. The RFR
for foreign investors is low which makes it a lucrative stock for foreign investors. For Indian
scenario we have to just invest on short term basis and move out in case of price correction
for foreign investors.

References:

www.tradingeconomies.com
www.moisp.org.in
http://www.tciscs.com
www.tcil.com

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http://www.concorindia.com
http://www.ciilogistics.com/
http://www.chartered.co.in/groupof.html
http://www.indiainfraguru.com/logistics.html
http://www.aqualogistics.com/case9.html
http://www.pwc.com/in/en/publications/Transport_Infrastructure_report.jhtml
http://www.essar.com
http://www.itln.in/
http://www.shahilogistics.com/newsinfo.htm
http://www.shipindia.com/newsite/default.asp
http://www.valuenotes.com/
http://www.bloomberg.com/markets/stocks/movers_index_dow.html
http://www.activeboard.com/forum.spark
http://www.moneyworks4me.com/
http://in.reuters.com/finance/stocks/overview?symbol=TCIL.NS
http://www.visualeconomy.com/MarketMonitor
http://www.investopedia.com
http://www.valuepro.net/approach/freecash/freecash.shtml
http://www.quickmba.com/finance/free-cash-flow/
http://www.investopedia.com/terms/f/freecashflowfirm.asp
http://www.economywatch.com/indianeconomy/
http://www.mospi.gov.in/mospi_iip.htm
http://goidirectory.nic.in/
INVESTMENTS- BODIE, KANE, MARCUS & MOHANTY.
FINANCIAL MANAGEMNT- I.M.PANDEY
ACCOUNTING FOR MANAGEMENT- Dr.JAWAHAR LAL
FUNDAMENTALS OF STATISTICS- S.C.GUPTA

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