Core business to multiply exponentially ahead: Arshiya Intl

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Core business to multiply exponentially ahead: Arshiya Intl

In an interview with CNBC-TV18, Nijay Nair, HD-Strategic Initiatives, Arshiya International said, the company’s logistic business has grown about 40% CAGR over the last five years. He further said, in the next year, the free trade zone will be a larger contributor and the core business will actually multiply exponentially.

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In an interview with CNBC-TV18, Nijay Nair, HD-Strategic Initiatives, Arshiya International said, the company's logistic business has grown about 40% compound annual growth rate (CAGR) over the last five years.

He further said, in the next year, the free trade zone will be a larger contributor and the core business will actually multiply exponentially. "We expect much higher CAGR than what we did in the last five years, and margins will be similar," he added.

Below is the transcript of his interview with CNBC-TV18's Ekta Batra and Reema Tendulkar. Also watch the accompanying video.

Q: We understand that the company's second free trade warehousing zone is coming up in Delhi. Could you give us a little more detail about that? What's the investment lined up and what revenues could you accrue from that?

A: We are a logistic business company. We have a ten year legacy in providing these logistic services. This business has grown about 40% compound annual growth rate (CAGR) over the last five years. It is a high return on equity (ROE) and free cash generating business. We have decided to take this forward with three strategic infrastructure investments in the area of free trade zone, rail and domestic distriparks, considering the dynamics of trade.

We have launched first of the free trade zone in Bombay. The second one is catering to the northern region. That has shown a tremendous response so far because it is the first free trade zone the country has. Overall, we have invested about Rs 1,000 crore into the FTWZs business already.

The rail business, which is coming up, is going to connect five of these zones that we are building in pan India. All of these actually support the core logistics business that we have. So, from a revenue perspective, yes, the infrastructure adds in better because it's first of the kind. But all the services that are provided inside of that is what we do for the last ten years.

Q: Can you then quickly tell us what this would do in terms of FY12 for?

A: I am not at liberty from the board to discuss our numbers. But I will tell you that over the last year, we did grow our income about 56%, but more interestingly our net profit increased about 25%. If you look at the contributors of growth, entire soft logistic businesses, which is non-asset based high ROE business, has contributed significantly. We have got our new infra projects like rail contributing 21% of our net top-line in the last year versus 9% the year before.

Q: Can you give us a percentage increase over Rs 800 crore, which you did in FY11, just a ballpark figure?

A: Ballpark, rail did about 21%. The free trade zone, which was just launched for one month, gave only about 3.5% contribution. But, in the next year, we will see that the free trade zone will be a larger contributor and the core business will actually multiply exponentially. So, we expect much higher CAGR than what we did in the last five years, and margins will be similar.