Very soon the Government is likely to bring out a regulation stipulating even truck and bus chassis to be transported through vehicle carrier, thereby making it compulsory for all vehicles, including 3-wheelers, 4-wheeled mini trucks, tractors and construction equipment, to be transported only on vehicle carriers. This will result in increased demand for vehicle carriers, says Mr. Sushil Rathi, COO, Mahindra Logistics Ltd. (MLL).
Mahindra Logistics is one of the pioneering and largest 3PL solution providers in the car carrier segment, serving leading OEMs with wide presence across the country. It is an integrated, end-to-end logistics service provider offering logistic solutions, warehousing, freight forwarding and supply chain services to its customers across multiple industries, including automotive, deploying over 75,000 trucks every month on an average. The company operates in two business segments – supply chain management (SCM) and people transport solutions (PTS).
Mr. Sushil Rathi explains the market scenario and his company’s ambitious growth plans.
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The ‘Mahindra’ connection
MLL began its journey by providing logistics services to the Mahindra Group which has multi-locational manufacturing facilities. This allowed it to build a strong pan-India network in auto logistics. By now it has built a formidable ecosystem of over 1,500 business partners on the back of providing logistics services to Mahindra & Mahindra.
MLL has a unique ‘asset-light services led’ business model, pursuant to which assets necessary for operations such as vehicles, warehouses and manpower are provided by its business partners. This enables it to offer a variety of flexible scalable solutions and services based on the client’s requirement and handle complexities that are unique to the Indian logistics industry.
In addition to this, it allows MLL to manage any fluctuations in demand more efficiently and minimize any adverse effect resulting from cyclical movements. High return on equity, low capital expenditure requirements and lower working capital requirements are some of the key benefits MLL will continue to enjoy due to its ‘asset-light’ 3PL model.
New opportunities ahead
The Indian car market is expected to touch five million units by 2020 from the current level of four million units. Every car manufactured needs to be transported from the factory to the point of sale. On an average, a car carrier in India carries around 8 small cars or 6 to 7 big SUVs in one trip. There are more than 15,000 car carriers in operation currently, and new fleet addition is to the tune of around 2,000, which includes replacement of the existing fleets and additional fleets.
It is not just cars. Very soon the Government is likely to bring out a regulation stipulating truck and bus chassis to be transported through carriers, making it compulsory for all vehicles, including 3-wheelers, 4-wheeled mini trucks, tractors and construction equipment, to be transported only on vehicle carriers. All this will result in increased demand for vehicle carriers in the years to come.
The afore-mentioned expansion in the car market will inadvertently give a boost to automotive logistics. In addition, the Government is also providing boost to the logistics sector in the last couple of years, with GST, infrastructure status, E-way bill and new department for the sector. It has made some structural changes too, which will help in co-ordination between ministries and departments. It has appointed Special Secretary – Logistics as well as a Department of Logistics under the Commerce Ministry.
There have also been procedural changes such as implementation of E-Way Bill and the initiative to set up a National Logistics Portal by the Department of Commerce. All these initiatives together would help in reducing the cost of logistics and improving India’s rank in the Logistics Performance Index.
FY 2018-19 performance
Having completed one year since our listing, I am happy that we continued to generate value for all our stakeholders. We have added new clients across the service offerings. We continue to have positive outlook as we help customers redesign their supply chain for effectiveness and efficiency.
Vision for future
The MLL vision is to grow as a Rs. 6,000-crore company by FY 2021. It plans to consistently grow in its chosen industry verticals. CRISIL Research has estimated that the size of the 3PL market in India will grow at a CAGR of approximately 19-21 per cent by FY 2020, on the basis of the current market share in various sectors. It expects the share of 3PL in the overall logistics market to increase from approximately 5 per cent in FY 2017 to approximately 7 per cent by FY 2020. MLL’s business growth would be further accelerated by the encouraging industry trends.