Aim to make India next transshipment hub: Arshiya Intl

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Head of strategic initiatives at Arshiya International , Nijay Nair tells CNBC-TV18 that he plans to establish India as the next transshipment hub, competing with the likes of Singapore and Dubai. "Our free trade and warehousing zone in Mumbai has reached full capacity, and with all our service verticals coming into play, we are seeing great response from the market," he said in an exclusive interview.

Arshiya also plans to launch an integrated facility in Delhi. "We will revolutionize the way the statistics work in the north with all three of our infrastructure coming together," said Nair.

Below is an edited transcript of his interview with Reema Tendulkar and Ekta Batra. Also watch the accompanying video.

Q: We understand that the phase I of the Mumbai free trade and warehousing zone is now operating at full capacity. Just take us through the details and basically where exactly is the demand being fueled from?

A: Yes, the first phase of our free trade zone in the last quarter just had three of our warehouses and now we have added the fourth one. The integrated play of Arshiya which includes all our service verticals is coming into play and we are seeing a great response from the market, which is going to reflect in the quarters and number as well.

So we have got some major announcements; we crossed the 150 customer mark after servicing the likes of Kodak, Honeywell etc. We have also won a very big deal with L&T, servicing one of the prestigious power projects in India, where the product is going to wait in the free trade zone and then we will do the last mile distribution of this product pan India.

So the free trade zone is really catching up in terms of its true capacity and we believe that over the next couple of years we will establish India as a transshipment hub, competing with Singapore and Dubai.

Q: Last quarter, phase I of the Mumbai free trade and warehousing zone contributed Rs 30 crore by way of revenue. How much will it contribute in the coming quarter and how much can you scale up this particular Mumbai I?

A: As a developer, we do have some rental component in the Rs 30 crore. But since we are an integrated player and we have been in the logistics space for about 11 years, we have only contributed marginally in terms of the services that are possible out of the product that is going to stay in the zone.

In this particular quarter, we have not only added one more warehouse but we will look at almost doubling all the services that we are giving. So we will see a very significant increase.

Q: Can you quantify what the significant might be?

A: Unfortunately I will not able to comment on that because I don't have the statistics on the board to talk about forward numbers. But if you just look at our history, in the last quarter, the free trade zone contributed about 14% to our overall top line and we do believe that this will increase significantly. I have been on the channel before and indicated that this might almost double in the few quarters to come.

Q: What's the plan in Delhi, what are we expecting there?

A: Delhi is very exciting. Since we have actually run out of space to give to our customers in the first zone, we will be launching the integrated facility for us in Delhi, which will include a free trade zone, a domestic district park, all linked with the largest private trade terminal that is going to be developed by us. All of this will start reflecting in our P&L in the coming quarter. We do have huge demand and a lot of customers that use the free trade zone and one zone automatically want to use it to another.

So that in perspective of what our entire infrastructure is going to be looking like, we will revolutionize the way the statistics work in the north with all three of our infrastructure coming together.

Q: You said that there could be an impact on the P&L in the coming quarter. What sort of impact could we see?

A: These are projects that take us three-four years in gestations so it's been a long time. Thee years is fairly fast in the schematic of things. In the global economies we have been able to show the conviction in developing, but the revenues will start hitting the line and you can use whatever we have delivered out of Bombay free trade zone as a bench mark for what we will deliver out of Delhi.

Q: So could you tell us for FY12 what the operating margins will look like because you will get a lot of operational efficiencies in place?

A: Yes absolutely. Economies of scale is the name of the game and unfortunately the fragmented space of logistics is such that we are the only players who can bring such economies of scale with our services, which is a completely asset like free cash generating business. It's actually the services part of the business that gets us the customers and then the customers fuel us and part of the business.

I can't comment on the numbers as such, but if you look at FY11 numbers, we had a very small contribution from the free trade zone and rail contributed 20% of our overall top line. We will be looking to much better all of those, so we can look at better margins than what we have delivered before.