ARSHIYA INTERNATIONAL LIMITED
ANNUAL REPORT 2011-2012
The Members of
Arshiya International Ltd.
Your Directors are pleased to present the 31st Annual Report together with
the Audited Accounts for the financial year ended 31st March, 2012.
A) SUMMARIZED FINANCIAL RESULTS- ARSHIYA INTERNATIONAL LTD
(Rs. in Lacs)
Year ended Year ended
Income from operations and other Income 63,000.80 47,542.53
Expenditure 54,438.59 43,145.22
Profit Before Depreciation & Tax 8,562.20 4,397.30
Depreciation 1,642.79 696.10
Profit Before Tax & Exceptional Items 6,919.41 3,701.21
Prior period Items(Net) (11.10) 19.49
Provision for Taxation 2,168.23 1,152.27
Profit After Tax 4,751.18 2,493.40
Balance B/f 4,332.11 2,909.18
Amount available for Appropriation 9,083.29 5,402.58
Proposed Dividend 823.61 705.95
Dividend tax 133.61 114.52
Transfer to General Reserve 480.00 250.00
Balance Carried to Balance Sheet 7,646.06 4,332.11
Income from Operations, along with other income has increased by more than
32.51% as compared to the previous year. The Profit before Tax has recorded
increase of 86.95% over that of the previous year and the Profit After Tax
has increased by 90.55% as against the previous financial year.
B) SUMMARIZED CONSOLIDATED FINANCIAL RESULTS-ARSHIYA INTERNATIONAL LTD AND
(Rs. in Lacs)
Year ended Year ended
Income from Operations and other Income 106,487.38 82,435.82
Expenditure 92,300.74 72,765.25
Profit Before Tax & Exceptional Items 14,186.63 9,670.57
Profit After Tax before Minority Interest 12,079.98 8,223.01
Less Minority Interest - 22.36
Net Profit for the year 12,079.98 8,200.65
On a Consolidated basis your Company has recorded a 29.18% increase in
income and 47.31% increase in profit after tax over the previous year.
The Directors recommend a dividend @ 70%. i.e. Rs. 1.40 per equity share
of Rs. 2 for the financial year ended 31d March, 2012 The Dividend on
Equity Shares, if approved by the Members, would involve a cash outflow of
Rs. 957.22 Lacs including dividend tax.
TRANSFER TO RESERVES
Your Directors propose to transfer a sum of Rs. 480 Lacs to the General
Reserve Account for the year ended 31st March, 2012.
BUSINESS AND FUTURE OUTLOOK
Your Company has over the past few years continuously and steadily strived
to improve the logistics landscape in our country. Beginning with a strong
foothold in the asset light logistics services industry, your Company
embarked on a journey to create world class logistics infrastructure on a
pan India basis which would provide natural integration to its core
logistics business and revolutionize the logistics space in India.
Arshiya plans to capitalize on India s mammoth logistics opportunity by
being India s only Unified Supply Chain Infrastructure and Solutions Group.
With 11 year legacy in the logistics and supply chain industry in India
servicing over 1,500 customers including over 275 at Arshiyas FTWZs alone,
Arshiyas unique business model makes it a pioneering company, not just in
India but world over. With a planned investment outlay of USD 1.6 billion,
your Company will be the industry pioneer in development and operations of
state-of-the-art logistics infrastructure solutions across strategic
locations in India. Your Companys sole mission is to provide India with the
logistics infrastructure solutions that would allow this great nation to
capitalize on its true macro-economic potential.
The Mumbai FTWZ has seen phenomenal growth over the year gone by and the
Khurja FTWZ near New Delhi too has seen a strong traction of customers. In
the rail space, your Company has signed a long term deal with GATX India to
lease its rakes to Arshiya Rail. This move will help Arshiya Rail migrate
its business to a capex lean model, resulting in lower gearing and improved
margins. With this development and the commissioning of our logistics hub
in Khurja, your Company extremely positive about the coming year.
(I) Arshiya Free Trade & Warehousing Zones (FTWZ):
The FTWZ regulatory framework has given India the much needed impetus to
drive its economic growth to the next level, truly leveraging the nation s
vast domestic market and growing purchasing power parity. Over the last few
decades India has been losing investments to neighbouring economies, which
were being used by global corporations as bases for feeding India, due to
lack of comparable infrastructure availability in India.
With FTWZs developed by Arshiya, our country will be able to leverage Soft
Infrastructure such as skilled manpower, cost competitiveness, regulatory
framework, IT connectivity, as well as Hard Infrastructure such as
dedicated state-of-the-art mega logistics parks FTWZs, rail connectivity,
industrial & distribution hubs, transport & handling and world class supply
chain management services. FTWZ will be a game changer for international as
well as domestic companies which are importing, exporting or re-exporting
products to and from India.
(II) Arshiya Rail & Rail Infrastructure:
Arshiya Rail Infrastructure started its operations in February 2009. As at
31st March, 2012, Arshiya Rail has 20 trains to its pan India operations in
Phase 1. Our unique model has resulted in Arshiya Rail being the second
largest and the most profitable Private Container Train Operator (PCTO) in
(III) Arshiya Industrial & Distribution Hub Ltd.
Arshiya Industrial & Distribution Hub is a venture designed to provide
companies with a strategic hub warehousing for domestic consolidation of
goods. These rail-connected mega consolidation hubs will result in
considerable time and cost reduction.
The first of Arshiya s five planned Industrial & Distribution Hub is
strategically located at the confluence of the Eastern and Western freight
corridors at Khurja (near Delhi), in the state of Uttar Pradesh. It is
further benefited by the adjoining presence of the modern high-capacity
Rail Terminal developed by Arshiya Rail infrastructure and Arshiyas FTWZ.
It will allow companies to access ports and the hinterland through both the
freight corridors. This debottlenecked location, helps companies to cut
down drastically on so-called inevitable transportation expenses, prevalent
(IV) Arshiya Forwarding
With a decade of lineage in integrated logistics solution Arshiya
forwarding offers end-to-end Freight Management, Transportation, Document
Management, Customs Clearance and Project Logistics services across the
network of 150+ countries worldwide.
(V) Arshiya Supply Chain Management
Arshiya Supply Chain Management provides end-to-end supply & demand chain
solutions and is committed to evolving end-to-end strategic solutions
across supply chain management by using innovative technology.
Group Subsidiary Companies and Consolidated Financial Results
The Company has following subsidiaries as on 31st March, 2012. Arshiya
Domestic Distripark Ltd
Arshiya Industrial & Distribution Hub Limited (formerly known as Arshiya
Northern Domestic Distripark Limited)
Arshiya FTWZ Limited
Arshiya Central FTWZ Limited Arshiya Northern FTWZ Limited
Arshiya Rail Infrastructure Ltd
Arshiya Rail Siding & Infrastructure Limited
Arshiya Supply Chain Management Pvt Ltd
Arshiya Transport and Handling Ltd
Arshiya Hongkong Ltd. and its following subsidiary
Arshiya Logistics LLC, Dubai
Arshiya International Singapore Pte Ltd
Cyberlog Technologies International Pte Ltd
Cyberlog Technologies Hongkong Limited
Arshiya Technologies (India) Pvt. Limited
Cyberlog Technologies (UAE) FZE
The Group also include Ajay & Archana Mittal Family Private Trust as
defined in erstwhile MRTP Act, 1969.
As required under the listing agreements with Stock Exchanges, a
consolidated Financial Statement of the Company and all its subsidiaries
prepared in accordance with Accounting Standards 21 and 23 issued by the
Institute of Chartered Accountants of India (ICAI) giving details of
financial resources, assets, liabilities, income, profits, etc. of the
Company, its associates and subsidiaries, after elimination of minority
interest as a single entity, is annexed.
In accordance with the general circular issued by the Ministry of Corporate
Affairs, Government of India dated 8m February, 2012, the annual accounts
and other documents of the Subsidiary Companies are not being attached with
the Annual Report of the Company. The Annual Accounts of the above referred
subsidiaries as at 31st March, 2012, and related detailed information will
be made available to any member of the Company/its subsidiaries seeking
such information at any point of time and the same will also be available
for inspection by any Member of the Company/ its subsidiaries at the
Registered Office of the Company and will be available on the website of
the Company. In addition, the Annual Accounts of the said subsidiaries will
be made available for inspection at the Registered Office of the respective
During the year under report /review, seven step down subsidiaries of the
Company, viz. Arshiya Southern Domestic Distripark Ltd., Arshiya Eastern
Domestic Distripark Ltd., Arshiya Western Domestic Distripark Ltd., Arshiya
Central Domestic Distripark Ltd., Arshiya Exim Trading Ltd., Arshiya
Eastern FTWZ Ltd., Arshiya Western FTWZ Ltd. have ceased to be step down
subsidiaries of your Company. Further, another step-down subsidiary of your
Company, Cyberlog Technologies Inc., USA has been dissolved.
AMALGAMATION OF SUBSIDIARY COMPANIES
The wholly owned subsidiaries of your Company viz. Arshiya FTWZ Limited
(AFTWZL) and Arshiya Domestic Distripark Limited (ADDL) are in the process
of getting merged with your Company and necessary petitions have been
presented before the Bombay High Court.
Your Company has been following the principles of good Corporate Governance
over the years and lays strong emphasis on transparency, accountability and
integrity. As per clause 49 of the listing Agreement entered into with BSE
and NSE, a separate section on Corporate Governance forms part of this
A Certificate from a Practising Company Secretary confirming compliance
with the conditions of Corporate Governance under Clause 49 of the listing
Agreement is also attached to this Report.
Mr. Ashish Bairagra and Mr. Rishabh P. Shah, Directors, retire by rotation
and being eligible, offer themselves for re-appointment at the ensuing
Annual General Meeting.
Mr. V. Shivkumar opted for retirement from the Board w.e.f. 14"1 May, 2012.
The Board acknowledges and places on record its deep appreciation of the
valuable contributions made by Mr. V. Shivkumar as an Executive Director of
ARSHIYA EMPLOYEE STOCK OPTION PLAN 2007
Employee Stock Option Plan 2007 is now administered by the Compensation
Committee of the Board. The applicable disclosures required under
Securities and Exchange Board of India (Employee Stock Option Scheme and
Employee Stock Purchase Scheme) Guidelines, 1999, as at 31st March, 2012,
are set out in Annexure I to this Report.
Your Company has received a certificate from the Auditors of the Company
that the Scheme has been implemented in accordance with the SEBI Guidelines
and the resolution passed by the shareholders. The certificate would be
placed at the Annual General Meeting for inspection by members.
DIRECTORS RESPONSIBILITY STATEMENT
In accordance with the provisions of Section 217 (2 A A) of the Companies
Act, 1956, with regard to the Directors Responsibility Statement, the
Directors confirm that:
a) in the preparation of the annual accounts, the applicable accounting
standards have been followed and there has been no material departures;
b) the selected accounting policies were applied consistently and the
Directors made judgments and estimates that are reasonable and prudent so
as to give a true and fair view of the state of affairs of the Company as
at 31st March, 2012, and of the profit of the Company for the year ended on
c) Proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956, for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;
d) the annual accounts have been prepared on a going concern basis.
SECRETARIAL AUDIT REPORT
Your Company had engaged Mr. P.K.B. Nambiar, Practising Company Secretary,
to review Secretarial Compliance for the financial year ended 31st March,
2012. The Secretarial Compliance Certificate addressed to the Board of
Directors of the Company forms part of this Annual Report. The Secretarial
Compliance Certificate confirms that the Company has complied with the
applicable provisions of the Companies Act, 1956, Depositories Act, 1996,
Listing Agreement with Stock Exchanges and all the Regulations of SEBI as
applicable to the Company including SEBI (Substantial Acquisition of Shares
and Takeovers) Regulations, 2011 and the SEBI (Prohibition of Insider
Trading) Regulations, 1992.
The Secretarial Compliance Certificate, although not mandatory, is also
obtained on a quarterly basis and reviewed by the Board.
For your Company, employees are the most valuable assets. Attracting,
training, growing and retaining talented professionals continue to be the
focus for Human Resources division of your Company. This division focuses
on creating an organization which nurtures continuous improvement and
innovation in management practices. Your Company recognizes the need to
attract best-in-class talent from diverse domains and industries.
Accordingly, hiring practices have been improvised to help identify the
best talent in a cost effective manner. Pay for performance philosophy
helps us in rewarding high performers thereby motivating talent and
enhancing retention. Over the year, your Company has added key senior
management as well as middle management resources across divisions. The
Arshiya Global Internship Program has helped international management
students to work on live projects on a real time basis and get hands on
experience of working in India. The Human Resources at Arshiya will
continue its focus on enhancing the service levels and creating a culture
of employee friendly environment.
HEALTH, SAFETY AND ENVIRONMENT:
As a responsible corporate citizen, your Company lays considerable emphasis
on health, safety aspects of its human capital, operations and overall
working conditions. Thus being constantly aware of its obligation towards
maintaining and improving the environment, all possible steps are being
taken to meet the toughest environmental standards on pollution, effluents,
etc. across various spheres of its business activities.
Arshiyas Rail Infrastructure division especially plays a pivotal role in
the mitigation of pollution and reduction of fuel used for road travel
through its unique Rail solutions that it provides to corporations at pan-
Your Company has implemented several proactive measures towards ensuring
its logistics infrastructures especially the FTWZ in Mumbai and Khurja,
along with the Industrial & Distribution hub are environment friendly.
Following measures are being implemented in Mumbai FTWZ, which will be
followed across locations:
- Rain water harvesting
- Development of green area: Re-plantation of 7000 trees in the FTWZ
- Conservation of top soil by removing and storing it before the digging/
piling work. The top soil was re-used for developing the green areas
- Developed water bodies as natural storage and utilizing the water from
it, throughout the year.
- Provision provided in the storm water drainage system to allow ground
- Sewage treatment plant in all the facilities - Mumbai FTWZ, Khurja FTWZ
as well as the Khurja Industrial and Distribution Hub. Water treated in
these plants is being re-utilized for watering of the landscaping.
CORPORATE SOCIAL RESPONSIBILITY
Your Company sincerely believes that growth not only needs to be profitable
and competitive, but also sustainable in a socially relevant manner. Todays
business environment especially in India therefore demands that corporates
play a pivotal role in shouldering social responsibility. Your Company is
committed to its endeavour in social responsibilities for benefit of the
Under the Corporate Social Responsibility (CSR) initiative of the Company
Arshiya Cares, your Company has pledged to join hands with organizations
who are working towards finding simple solutions to the infrastructure
problems that India faces. Following CSR initiatives have been undertaken
by your Company in the social front:
Emergency Fire Fighting Service: The Mumbai FTWZ at Sai Village, Panvel has
a 24x7 emergency fire fighting vehicle (Foam Tender) inside the zone
managed by trained personnel. This service is supported by dedicated
infrastructure which includes:
- Fire extinguishers and Signage (Fire safety plans)
- Ceiling based water sprinklers for the stores and office space
- Beam Detectors for Smoke and Fire Detection
- Fire Hydrant System with hose reels and underground water storage tanks
- Emergency Fire exit doors and staircases
- Building Management System with Monitoring and Public address systems to
provide emergency response
Available 24x7 to the residents in the vicinity of Sai Village and Panvel
area, free of charge through a toll free number
Emergency Ambulance Service:
The Mumbai FTWZ at Sai Village, Panvel has a 24x7 emergency ambulance
service dedicated for residents in the vicinity of Sai Village and Panvel
area. Stationed in the premise of the zone, it is equipped with expert
staff trained in Trauma treatment. This service is available to the local
population free of charge through a toll free number.
Electricity Distribution Facility:
At the Mumbai FTWZ at Sai Village, Panvel, your Company has created
additional capacity in its electrical infrastructure to enable supply of
electricity to the surrounding villages.
Empowering Villages Everywhere (EVE) Rs. Solar Lamps for Villages:
Your Company supported a novel initiative by school children based in
Mumbai, for providing solar lamps to villages at a subsidized rate. Under
the EVE program portable solar lamps were provided to villages where
electricity is not available. By subsidizing the cost, EVE was able to
offer villagers an opportunity to increase productivity and improve their
quality of life. At Arshiya we have pledged to join hands with EVE and
support them in this initiative to help light lives.
CODE OF CONDUCT
The Board has laid down a Code of Conduct for all Board Members and Senior
Management of the Company. The Code of Conduct has been posted on the
Company s website.
Board Members and Senior Management personnel have affirmed compliance with
the Code for the financial year 2011-12. A separate declaration to this
effect is annexed to the Corporate Governance Report.
Junoon Celebrity Charity Cricket Match:
Your Company supported EVE in a celebrity charity cricket match Junoon
which was organized for the benefit of the physically challenged. The
ticket proceeds of this match were used to provide artificial limbs to the
physically handicapped living in the rural district of Satara, Maharashtra.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS
Information as required under section 217(e) of the Companies Act, 1956
read with the Companies (Disclosure of particulars in the report of Board
of Directors) Rules, 1988 are set out as under:
Conservation of Energy: The operations of the company involve low energy
consumption. Adequate measures have been implemented to conserve energy
Roof of the warehouses at our FTWZs and Industrial & Distribution Hubs have
been designed with MR24 standards. A provision of installation of solar
panels has been made on the roofs to generate renewable energy.
Orientation of the warehouse buildings has been done in such a way that
there is less heat transmission resulting in saving the electricity
consumption by minimizing heat loss in the HVAC system.
Technology Absorption: Arshiya sincerely believes in utilising technology
to improve productivity, efficiency and quality of its business operations
and working environment.
Foreign Exchange Earnings and Outgo:
Foreign Exchange received - Rs. 878,065,074/-
Foreign Exchange incurred - Rs. 198,609,328/-
PARTICULARS OF EMPLOYEES
Pursuant to the provisions of Section 217(2A) of the Companies Act, 1956
read with the Companies (Particulars of Employees) Rules, 1975 as amended,
the names and other particulars of employees are set out in the Annexure to
the Directors Report. However, as per the provisions of Section
219(1)(b)(iv) of the said Act, the Annual Report excluding the aforesaid
information is being sent to all members of the Company. Any member, who is
interested in obtaining such particulars about employees, may write to the
Company at Registered Office of the Company.
The observations in the Auditors Report are self explanatory and need no
M/s MGB & Co., Chartered Accountants, Mumbai, Auditors of the Company,
retire at the ensuing Annual General Meeting and are eligible for
The Company has received a certificate from M/s MGB & Co., Chartered
Accountants, Mumbai, confirming that their appointment, if made, would be
in accordance with the provisions of Section 224 (1B) of the Companies Act,
Your Directors would like to express their gratitude for the assistance,
support and co-operation received from the Goverment of India, the State
Governments and the other Government agencies and their departments,
investors, bankers, financial institutions and all other stakeholders.
Your Directors also wish to place on record their deep sense of
appreciation for the committed services by the executives, staff and
workers of the company.
For and on behalf of the Board of Directors
Ajay S Mittal
Chairman & Managing Director
Dated: 07th July, 2012.
ANNEXURE -1 TO THE DIRECTORS REPORT
The details of Options granted under The Arshiya Employee Stock Option
Plan, 2007, (hereinather referred as The ESOP Plan-2007 ) as at March 31,
Particulars ESOP Plan-2007
Options outstanding at the
beginning of the year 117,270
Options granted during
the year NIL
The Pricing Formula The Stock Options granted at Rs.210/- per
Option as determined by Compensation
Options exercised NIL
The Total number of shares
arising as result of
exercise of option NIL
Options lapsed and
the year. 102,810
Variation of terms
of options NIL
Money realised by
exercise of options NIL
Total number of options
in force at the end of
the year 14,460
Employee-wise details of
options granted during
the year to:
I. Senior Managerial
II. Any other employee who
receives a grant in any
one year of option
amounting to 5% or more
of Options granted NIL
during that year.
III. Identified employees
who were granted option,
during any one year,
equal to exceeding 1% of
the issued capital
warrants and conversions)
of the Company at the
time of grant. NIL
Diluted Earnings Per Share
(EPS) pursuant to issue of
shares on exercise of
option calculated in
(AS) 20 Earnings per
Method used for accounting The employee compensation cost has been
of the Options calculated using intrinsic value method of
accounting for Options under the Company`s
Employees Stock Options Plan
Price of Option at the
Grant Date Rs.210
1. Vesting schedule and Exercise Period is as below:
35%:- 12 months from the grant date
35%:- 24 months from the grant date
30%:- 36 months from the grant date
One year from the date of vesting of options or within 5 years from the
date of grant of options, whichever is earlier.
2. No options were granted during the year.
For and on behalf of the Board of Directors
Ajay S Mittal
Chairman & Managing Director
Dated: 07th July, 2012.
ANNEXURE - II TO THE DIRECTORS REPORT
SECRETARIAL AUDIT REPORT
The Board of Directors
Arshiya International Limited
3rd Floor, Plot No 61,
Road No 13 M.I.D.C.,
Andheri (East) Mumbai 400 093
I have examined the registers, records, books and papers of M/s. Arshiya
International Limited (the Company) for the financial year ended on 31st
March, 2012 (financial year) that are required to be maintained under the
Companies Act, 1956 (the Act) and the rules made there under and also in
compliance with the Listing Agreement of Sock Exchanges. In my opinion and
to the best of my information and according to the examinations carried out
by me and explanations furnished to me by the Company, its officers and
agents, I certify that in respect of the aforesaid financial year:
1. the Company has kept and maintained registers as per the provisions of
the Act and the rules made there under and the entries therein have been
2. the Company has filed the forms, returns and documents required to be
filed with the Registrar of Companies and Central Government under the
Companies Act and the rules made there under and also with the Stock
Exchanges as per the listing agreement with them.
3. the Company has closed the Register of Members and Share Transfer
Registers in accordance with the provisions of the Act and the Listing
4. the Annual General Meeting for the financial year ended on 31st March,
2011 was held on 20th September, 2011 after giving due notice to the
members of the Company and the resolutions passed thereat were duly
recorded in the Minutes Book maintained for the purpose.
5. the Company has not held any Extra Ordinary General Meeting.
6. the Company has not advanced any loan to its directors or persons or
firms or companies referred to in Section 295 of the Act.
7. the Company has not entered into any contract specified in Section 297
of the Act.
8. the Company has made necessary entries in the register maintained under
Section 301 of the Act.
9. the Company has obtained approval of the Board of Directors and Members,
as may be required, pursuant to Section 314 of the Act.
10. the Company has complied with the provisions under the Companies Act
and rules made there under regarding transfer, transmission and issue of
11. the Company has complied with the provisions of applicable laws in
respect of transferAransmission of shares, declaration and payment of
12. the Company has complied with the provisions of the Act regarding
composition of the Board and appointment of Directors on the Board of the
13. the Company has complied with the applicable provisions regarding
appointment and payment of remuneration to the Managing and Whole Time
14. the Directors of the Company have disclosed to the Board of Directors
their interest in other firms/companies pursuant to the provisions of the
Act and the rules made there under.
15. the Company has not bought back any shares during the year under
16. the Company has not invited/accepted any deposit including any
unsecured loan falling within the purview of Section 58A of the Act.
17. the total borrowings by the Company from the financial institutions,
banks and others are within the borrowing limits of the Company as laid
down under Section 293(1 )(d) of the Act.
18. the loans and investments made and guarantee or securities provided to
other bodies corporate by the Company are within the limits and legal
19. the Company has generally complied with the provisions of the Act and
Rules made thereunder, where applicable.
Place: Mumbai P.K.B. NAMBIAR
Dated: 4th July, 2012 Company Secretary
MANAGEMENT DISCUSSION & ANALYSIS
GLOBAL MARKET OUTLOOK
Overall the global economy has entered a challenging new phase. Global
activity has weakened and become more uneven, confidence has fallen sharply
recently, and downside risks are growing. Against a backdrop of unresolved
structural fragilities, a barrage of shocks hit the international economy
last year. Japan was struck by the devastating Great East Japan earthquake
and tsunami, and unrest swelled in some oil-producing countries in the
Middle East. This has led to a downward revision in the world s economic
growth projections by the International Monetary Fund (IMF). As per the IMF
world economic outlook update 2012, the IMF has projected that the global
economy will grow to about 3.3 percent a year in 2012, with developed
economies growing at only 1.2% while emerging and developing economies
expected to grow at a much higher 5.4%.
So the most immediate challenges for developed economies is to restore
confidence and put an end to the crisis in the euro area by supporting
growth, while sustaining adjustment, containing deleveraging, and providing
more liquidity and monetary accommodation. In other major advanced
economies, the key policy requirements are to address medium term fiscal
imbalances and to repair and reform financial systems, while sustaining the
recovery. In emerging and developing economies, the near-term policy focus
will be on responding to moderating domestic growth and to slowing external
demand from advanced economies.
Despite emerging & developing economies showing a slow growth compared to
developed economies they have performed relatively well.
INDIA S MACRO ECONOMIC OVERVIEW
Though India has shown a remarkable growth over the past few years; the
year 2011 was marked by a phase of high inflationary pressures, high
interest rates in the domestic economy, rising uncertainty on the global
growth front, increased crude oil prices and the deteriorating business
confidence and consumer sentiment. The persistence of high inflation in the
domestic economy, at a time when India was on the verge of achieving its
pre-crisis growth levels, emerged as the key area of concern for the common
man and the government authorities alike. The sources of price pressures
which shifted from food articles to primary non-food articles and then to
manufactured non-food products had highlighted the pressure of managing
inflation by the Government and the RBI.
The prospect of buoyancy in the growth of the Indian economy which was
expected during the beginning of 2011 began to fade by the middle of the
year and then remained clouded by heightened uncertainty. As a result the
gross domestic product (GDP) growth slowed to 6.5% in the current fiscal
(FY 2011-12) from 8.4% in the previous two fiscals.
Despite the slow growth figure of 6.5%, India remains one of the fastest
growing economies in the world as all major countries (including some of
the emerging economies) are witnessing a significant slowdown. As per the
IMF, India is expected to contribute 12.4% to the world GDP growth in 2012
i.e. it is the 2nd highest contributor apart from China which is expected
to contribute 37.4%. China and India are going to contribute nearly around
50% of the total world GDP growth in 2012.
India s economic growth is expected to remain robust in 2012 and 2013,
despite a likely headwind of double-dip recessions in Europe and the US,
according to a United Nations annual economic report - World Economic
Situation and Prospects 2012. In the Union Budget 2012-13, Finance Minister
has projected that the Indian economy is expected to grow at around 7.6%
Currently, the economy is facing a slowdown due to weak industrial
production, weak global economy, rising inflation, rise in fuel prices,
weakening rupee, etc. Though India s growth rate has slowed down marginally
when compared with other western economics they are either contracting or
showing only anaemic expansion. Other major Asian economies are also
slowing down. Chinas economy grew 8.1% in the first quarter from a year
earlier, its weakest pace in almost three years.
GLOBAL LOGISTICS AND SUPPLY CHAIN INDUSTRY IN 2011
The year 2011 began optimistically for the transport and logistics
industry, however, as the year progressed, the industry was put to test.
Recovery from the recession did not occur as much as expected, resulting in
unsettling effect on the Industry i.e. declining cargo & demand.
Though the recovery was not full, many Transport & Logistics providers were
able to record profitable revenues. In the second half of the year,
pessimism set in as manufacturing activity slowed down throughout the world
including China. Increasing fears of a double-dip recession were much
discussed as two of the largest economic regions, the US and Europe, faced
troubling political and economic issues Rs. the US witnessing its first
downgrade in its credit rating and the increasing global concerns of Europe
s debt problems.
As the US and Europe struggled with economic issues, it appeared to be that
they were no longer contributing to the world economy as primary customers
of imported goods. As a result, we witnessed a radical shift in trade
patterns as emerging markets such as Russia, India, South America and the
Middle East began to exercise their growing economic strength. Demand from
these regions increased, resulting in China, the US and Europe targeting
their export trade to these markets.
Along with the economy being a major concern, natural disasters also played
havoc to global supply chains. The Japanese earthquake and tsunami caused
disruptions in the automotive industry, impacting manufacturing facilities
throughout the world. The Thai floods effect on the high tech industry
resulted in leading IT manufacturers to report lower quarterly earnings.
Both of these disasters highlighted the need for improved supply chain
planning for unforeseen events.
Thus, 2011 will be remembered as a year of great change -politically and
economically. The changes that 2011 brought forth will create opportunities
in the coming years for those financially stable transport and logistics
providers that have the ability to capitalise on these changes in this
evolving global economy.
LOGISTICS AND SUPPLY CHAIN IN INDIA:
India is an integral part of the global village and its reach has augmented
exponentially over the last few years, with Indian companies setting up
bases abroad and multinational firms entrenching themselves in India. In
view of the huge diversity in Indian topography and with business
transcending geographies, the supply chain network - the backbone of
growth, has become multi-modal and infrastructure dependent.
A well-developed, networked, globally benchmarked supply chain logistics
industry is imperative for the success and overall growth of the economy.
An efficient supply chain comprising unified infrastructure and soft
logistics solutions provides a competitive edge to companies especially in
India s demography. Supply chain and logistics had always been perceived as
a cost centre and across industries efforts are made to manage cost rather
than use it to enhance customer satisfaction and improve revenue growth.
However, in recent times there has been a marked change in this view with
companies now viewing it as an essential and strategic tool in their value
proposition, profitability and growth.
At 14% of GDP, India s spending on logistics is both significant and
inefficient. This is significantly higher than that in developed countries
where logistics spend is at around 8-9 % of GDP. These inefficiencies are
largely a result of India s diverse demography, and lack of unified supply
chain infrastructure which results in higher transaction costs for
operating in India as compared to other global economies. On an economy of
over USD 1.6 trillion India s supply chain and logistics inefficiency of 5%
also amounts to a market potential in excess of USD 80 billion.
India s logistics story is indeed an attractive one, fuelled by factors
like a rapidly growing economy, the increase in outsourcing of logistics
and a significant government thrust on investment in infrastructure.
Additionally, changes in tax and regulatory policies like the plan to
introduce a uniform Goods and Service Tax (GST) to obviate the need for
multiple warehousing will lead to a consolidation of the industry.
Presently, Indian logistics industry is highly fragmented and is still
evolving, with the top players only having a miniscule 6% market share
which is expected to increase to approximately 12 % by 2015.
As the Industry is highly unorganized, expecting quality service from these
players was a distant dream for customers. However, with the advent of
technology-led solutions in this sector and emergence of organized
logistics players, companies in this sector are striving hard to deliver
quality services to their customers. Also, domestic companies are
increasingly outsourcing logistics services to 3PL players in order to
focus more on their core competencies.
The logistics industry in India is growing rapidly on the back of a growing
economy and estimates indicate that the improvement in logistics
infrastructure can have multiplier effects to the tune of 1-1.5% on the GDP
growth. With the Indian economy growing steadily, this augurs well for the
overall logistics industry.
INDIA S BIGGEST CHALLENGE IS ALSO ITS LARGEST OPPORTUNITY
The transportation sector in India is still dominated by the road segment
which accounts for 65% of the total freight traffic followed by railways
which accounts for about 30%. Due to higher dependence on roadways,
logistics industry efficiency gets affected due to traffic bottlenecks;
delay in clearing of trucks, etc. Thus dependency on road makes hinterland
cargo movement more expensive and inefficient. India burns nearlyUS$2.5
billion worth of fuel on account of trucks standing idle on state check-
As per World Bank s 2012 Logistics Performance Index (LPI) India ranks 46th
in terms of logistics in-efficiency among 130 countries globally Rs. in
terms of variables such as Rs. Customs Clearance, Infrastructure,
Timelines, Shipments, Logistics Competencies, Tracking and Tracing compared
to China which ranks 26th reflecting the inefficiencies that India needs to
address in order to progress.
India s opportunity lies in tacking its greatest challenges which are as
* While consumption in India will grow in real terms from USD 378 billion
presently to USD 1.56 trillion by 2025 Rs. a fourfold increase, in reality
India ranks only 13th in terms of importing world products, consuming just
over 2% of globally produced merchandise, but growing at 35%
* While by 2020, India is projected to have an additional 47 million
working population, almost equal to the total world shortfall, with an
average Indian age of 29 fuelling our ability to become a manufacturing
Mecca of the world, the reality
is that India ranks 20th as per WTO in terms of exporting world products
contributing just over 1.4% of globally consumed merchandise, but growing
* India s container throughput in calendar year 2011 was just over 9
million TEUs (Twenty Equivalent Unit) approximately as compared to Dubai
(12 million), Singapore (28 million) and China (163 million) - Indicating
zero penetration in Value Addition, Hubbing and Re-Export market
* Less than 8% of India Inc. (manufacturing and services) outsources its
logistics while in the developed world the outsourcing is done by more than
45% of companies Rs. indicating the level of sophistication that is
required to be brought about in this space and the tremendous opportunities
present in the form of core growth and efficiency improvement
* The dominant road transport sector in India remains very largely
unorganized with an average trucker in India owning only about seven
trucks. This high dependence on road transport not only represents
inefficiencies arising from the bad quality of trucks and roads in India,
but also adds to the costs on account of product theft/loss, time taken for
delivery on account of state border crossings and loss of visibility of
* While India is the second largest small car market in the world, global
average for finished automobiles moving by trains is approximately 26%
while in India it is merely 3%
* India s power production capacity is set to increase from the current 1.5
GW to about 2.5 GW by 2017. This will represent a significant increase in
the requirement of coal that will be needed to be moved in the system. All
of this will have to move by Rail, thus increasing the importance of rail
as a transport medium in India s development
* At present majority of container freight traffic entering or leaving
India is out of one port Rs. Jawaharlal Nehru Port Trust (JNPT), in
Mumbai, requiring India to depend heavily on domestic freight movement for
last mile supply chain connectivity from this port to industrial hubs and
the end consumer
* Compared to European countries, rail transportation in India is almost
3.5 times more expensive and the average transit time by road is 3 times
longer as compared by rail for the same distance
* Even if India grows at the modest CAGR of 6%, its transport system will
have to move over 6 billion MT of cargo by 2020
* National Highways (NH), which constitutes only 2.3% of the total road
network, carries around 40% of the freight load.
ARSHIYA S UNIFIED SUPPLY CHAIN INFRASTRUCTURE & SOLUTIONS
To capitalise on India mammoth opportunity, Arshiya International has
pioneered the development and operations of a Unified Supply Chain
Infrastructure and Solutions - comprising Free Trade & Warehousing Zones
(FTWZ), Industrial and Distribution Hubs, Rail & Rail Infrastructure,
Transport & Handling, Forwarding and Supply Chain Technology & Management.
Arshiya s FTWZs in the west of India (Mumbai Rs. Panvel) and North (Khurja
near Delhi) are both operational. Each FTWZ will be accompanied by an
Industrial & Distribution hub catering to the domestic movement of goods
and state-of-the-art Rail terminals and connected with customised Rail
freight services. Arshiyas Khurja FTWZ in the state of Uttar Pradesh
spanning 135 acres started operations in January 2012. Located at the
confluence of the planned eastern and western freight corridors this zone
is part of Arshiyas 315 acres mega logistics hub which also includes a 50
acres rail siding and 130 acres Industrial & Distribution hub. Arshiyas
Khurja zone will be first of its kind in India, the pivot of its Unified
Supply Chain Infrastructure catering to EXIM through FTWZ, domestic
consolidation through Industrial & Distribution Hub, connected by a state-
of-the-art private Rail Siding and Rail freight services.
THE YEAR UNDER REVIEW
The year gone by has been a critical year in the history of Arshiya s
endeavours in the Supply Chain space. This year has seen Arshiya s growth
being heavily supported by the contributions from the asset businesses viz.
FTWZs and Rail Infrastructure. This year also witnessed the launching of
Arshiya s Khurja FTWZ which is part of the logistics hub that includes an
Industrial & Distribution Hub as well as India largest rail terminal. This
zone will strengthen Arshiya s foothold in the lucrative and fast growing
North Western corridor. Arshiya s Mumbai FTWZ in Panvel (Sai Village) near
JNPT is a state-of-the-art world class zone spanning 165 acres. It has seen
tremendous success since starting operations and presently services,
international and domestic clients across industries such as Automobile,
FMCG, IT Hardware, Pharmaceuticals, Precision & Heavy Engineering, Metals,
Commodities, Chemicals, Apparels, Trading Retail, Cosmetics, 3PLService
Providers, Shipping Lines, Wines and Spirits etc. In our Rail
Infrastructure vertical also, there have been significant high profile
customer additions catapulting the growth rate in this business.
Financial highlights 2011-12 Rs. Based on standalone Financials
* Total income increased by 30.82% from Rs. 453.01 cr in 2010-11 to Rs.
592.63 cr in 2011-12
* EBIDTA increased by 119.81% from Rs. 75.53 in 2010-11 to Rs. 166.03 cr
* EBIDTA margin increased from 16.67% in 2010-11 to 28.02% in 2011-12
* Net Profits increased by 90.55% from Rs. 24.93 cr in 2010-11 to
Rs.47.51 cr in 2011-12
* Net Profit margins increased from 5.5% in 2010-11 to 8.02% in 2011-12
Segment-Wise Performance Review
Turnover Turnover Y-o-Y increase
10-11 11-12 (decrease)
Logistics 432.18 497.84 15.19%
FTWZ 20.84 94.79 354.95%
Total Turnover 453.01 592.63 30.82%
Financial highlights 2011-12
Based on Consolidated Financials
* Total income increased by 28.70% from Rs. 821.52 cr in 2010-11 to
Rs.1057.33 cr in 2011-12
* EBIDTA increased by 72.29% from Rs. 162.05 cr in 2010-11 to Rs.279.20
cr in 2011-12
* EBIDTA margin increased from 19.73% in 2010-11 to 26.41% in 2011-12
* Net Profits increased by 47.31% from Rs. 82.01 cr in 2010-11 to
Rs.120.80 cr in 2011-12
* Net Profit margins increased from 9.98% in 2010-11 to 11.42% in 2011-12
Segment-Wise Performance Review
Turnover Turnover Y-o-Y increase
10-11 11-12 (decrease)
Logistics 620.35 613.41 (1.12)%
Software 6.35 0.75 (88.16)%
operations 169.24 271.61 60.49%
FTWZ and related
services 25.59 171.56 570.47%
Total turnover 821.52 1,057.33 28.70%
THE YEAR THAT WILL FOLLOW
With Arshiya s Mumbai and Khurja FTWZs being operational, your company has
achieved a milestone in its evolution. Businesses of FTWZs and Rail are
contributing incremental revenues and the coming financial year is
extremely exciting with Arshiya s unified supply chain infrastructure and
solutions at Khurja becoming operational with the inclusion of Industrial &
Distribution Hub and Rail terminal in addition to the existing FTWZ. Thus
Arshiya will be operating India s first unified supply chain infrastructure
catering to EXIM through FTWZ, domestic movements of products through
Industrial & Distribution Hub, connected with the most efficient mode of
surface transportation Rail and state-of-the-art dedicated Rail siding.
With a global economy expected to steadily improve over the next year and
India s increasing role as one of the fastest growing developing economies,
Arshiya International will be at the fore front as a pioneer creating a
backbone for the country s supply chain and logistics industry.
The Enterprise Risk Management (ERM) initiative, at Arshiya encompasses
practices related to identification, assessment, monitoring and
investigation of various risks to our business. The Company s ERM is being
aimed at minimizing risks that may affect the achievement of our business
objectives and enhance stakeholder value. Risk management is integral and
fundamental to Arshiya s business. Since Arshiya is operating in a highly
competitive environment, it is exposed to various strategic and operational
risks like trade related risks, financial risks, economic risk, liability
and regulatory risks. The Company has processes in place to safeguard its
assets and liability risks through adequate and appropriate insurance
Certain statements made in the management discussions and analysis report
relating to the Company s objectives, projections, outlook, expectations,
estimates and others may constitute forward looking statements within the
meaning of applicable laws and regulations. Actual results may differ from
such expectations, projections and so on, whether express or implied.
Several factors could make significant difference to the Company s
operations. These include climatic conditions and economic conditions
affecting demand and supply, government regulations and taxation, natural
calamities and so on, over which the Company does not have any direct