Arshiya Intl hopes to double revenue from free trade zone

2335 Investors following IID Forgings Lt. Share this News with them.

0

Like this story, share it with millions of investors on M3

Arshiya Intl hopes to double revenue from free trade zone

Nijay Nair, head strategic initiatives at Arshiya International joins CNBC-TV18 to talk about the way forward for the company. They have tied-up with Tata BlueScope Steel for certain projects.

Post your opinion here

 

0

Tweet

Share on Tumblr

ALSO READ See latest News about IID Forgings Lt See previous management interviews See what other Experts & Brokerages are saying about IID Forgings Lt Arshiya Intl BSE | NSE 31/05/12 Are Mutual Funds betting on Arshiya Intl?

Nijay Nair, head strategic initiatives at Arshiya International joins CNBC-TV18 to talk about the way forward for the company. Arshiya has major project plans in its kitty post its tie up with Tata BlueScope Steel. Nair says that the company is building a one of its kind infrastructure in India. "We are building state-of-the-art infrastructure, and we are now operational in the first free trade zone in Bombay, on which, Tata has provided us the pre-engineered buildings for making of the warehouses," he says.

Below is the edited transcript of the interview. Also watch the accompanying video.

Q: We understand that you have tied up with Tata BlueScope Steel. Just take us through that...

A: Tata provides us with the butler service in terms of the pre-engineered buildings that we use for our warehouses that we are building in our free trade zones. So this is in regards to our strategy to bring state-of-the-art infrastructure, which is about 13 meters high. It is like the ones you have seen in Singapore or in Dubai in the free trade zones. Sowe are building state-of-the-art infrastructure, and we are now operational in the first free trade zone in Bombay, on which, Tata has provided us the pre-engineered buildings for making of the warehouses. It will be the first of its kind in the country.

Q: Could you tell us the scope of this partnership that you have gotten into with Tata Group with respect to quantifying the revenues that you could potentially get from here and by when?

A: The free trade zone as such, this augments our soft services of logistics. So if you look at what the free trade zone has done just for our last quarter, it has contributed about 14% on our topline. That's the first phase of our zone fully operational since it was launched. With three warehouses and ancillary infrastructure, we generated about Rs 30-31 crore roughly. This is just the beginning, so we would expect that to at least double over the next few quarters. We are looking at very exciting times in terms of the market appreciating this.

Q: According to our understanding, any free trade warehousing zone requires a lot of investment. What have you chalked out by way of an investment in this fiscal year and even in the next fiscal year in your planning?

A: Our view of the free trade warehousing zone is something which is at pan-India macro economic level. So we are building five such zones, the first one is already operational in Bombay, and the second one is coming up in Delhi. In totality, we have done the Bombay one in two halves and it will be about Rs 1500 crore for totally building a million square foot of about 20 warehouses. Each warehouse will be about 120,000 square foot. Similarly, we are building this infrastructure in Delhi too. We have already spent about Rs 1000 crore in the development of free trade zones so far in Bombay, Delhi and Nagpur, and we will follow that up with another two in the south, possibly in and around Chennai, and another one in the east. Eventually, we plan to build five Free Trade and Warehousing Zone (FTWZ) footprint pan-India.

Q: Just throw some numbers at us then because in Q1 your sales were up around 26%, you had profit growth of around 43%. What are you expecting in FY12 for numbers?

A: I am not at liberty from the board to give you the numbers from a forward forecast, but if you look at these numbers that you just highlighted, the Rs 222 crore, 14% of that has come from the free trade zone in the very first full-phase of operational free trade zone in Bombay. In FY12, we will also have Delhi come up along with the Domestic Distripark, and also the contribution of this FTWZ into this will increase from 14% and at least double. So we are looking at very significant growth in FY12.

Q: Could we extrapolate this 26% to indicate that this could be your guidance or could you beat this 26% that you have seen in the first quarter?

A: We will endeavor to definitely beat that.

Q: Since you are getting increasing contribution from the free trade zone could you tell us the kind of margins you enjoy over there, and once you do establish this pan-India scale, what are the margins one can expect from this type of business?

A: I am not at liberty to discuss too much, but the point here again is that we are coming into the building of free trade zones with a 10-year legacy of logistics supply chain management and IT services. That's asset light-high ROE (return on investment) services business, which is simply augmented by the fact that we also have a zone which happens to be the first free trade zone in the country where there is a rental. So joint margins are very healthy.

Q: How are you funding all this investment that you laid out?

A: The first phase of our free trade zone is in Bombay, Delhi, Nagpur and also the first phase of our rail, along with the first of Distripark, which is together with the free trade zone and rail terminal in Delhi, is all funded for. We have already infused a significant amount of equity, close to about Rs 800 crore, as part of this. So the first phase we are fully funded and set.