Dhruv K Kotak, MD, JM Baxi Group: Post COVID-19 India will see V shaped recovery and South Asia will witness immense growth
You have activated PCS 1X through Portall much before COVID-19 and now I see the entire gamut of our industry talking about digitalisation, and I believe the user base has grown multi-fold in the last few months. So how do you feel now and what lies ahead?
PCS is the vision and initiative taken by the Ministry of Shipping and the Indian Ports Association, we are largely a technology partner and a solution provider. They deserve the entire credit to the same and it’s their achievement. During the COVID-19 period there has been a very stark realisation that digitalisation is not just a cool trend but there is immense utility to it. We always knew that there would be a reduction in transaction time and cost, but now it has become a necessity. During COVID-19 physical transactions and exchange of documentation was difficult, so it sort of hastened the transition towards digitalisation.
As the maritime community started getting digital out of this sheer need, there came a realisation that it leads to massive time and cost improvement.
Do you think it has become more acceptable now and people are showing more interest to logon to this platform?
The Port Community System comprises of the shipping agents, shipping lines, ports, customs and CHAs. But now we are observing that a lot of exporters/importers and end-users have been impacted. They are looking for more and more digital solutions as a part of their overall ecosystem. This is a huge change, as the awareness of what is possible digitally in a supply chain has spread beyond the core industry into the end-users, where they are becoming more aware and demanding digital solutions, as they have realised what disruption can mean to their supply chain.
Portall had many tie-ups recently like CargoX, Return Trucks and GOCON. What does all this mean for end-user?
Portall has developed a collaborative platform because we have seen over the past couple of years that multiple solution providers are offering quality products that operate in silos. Portall is using its experience from the PCS to bring together as many solution providers as possible onto a platform and make it available to end users to choose isolated solutions that they may require or combine these isolated solutions and get a complete suite of offerings or a complete digital solution. The idea is to bring more digital entrepreneurs onto a platform, enable them to provide a top quality solution for the end-users. This has been the goal for Portall and we have been able to achieve this in a small measure through P-CaSo solution.
Recently I was talking to a group of tech solution providers, so the question that came up is – do we need standardisation in our solutions? The second question is these solutions are generating huge terra bytes of data, so how do we leverage that?
I couldn’t agree more with both the points you have raised. Standardisation of data and types of documents is going to be absolutely critical. Until there is going to be standardisation of data sets and forms, it will be very difficult to create any form of data scalability. Otherwise we will be working in silos. All of this data will have to come and find itself in common platforms. This can be an initiative the government can nudge various private enterprises to access and share data through common platforms. The government is very actively trying this with the PCS, National Logistics Platform. It is a matter of adopting standardisation and single platforms to create scale.
Coming to harvesting the terra bytes of data – how you anonymise it, collect and set it with very strict rules with regards to privacy without allowing the gatekeepers taking undue advantage of it and this data even though held by the government is completely anonymised before sharing, because unless the data is not accessed by larger number of stakeholders, its value will get lost. So we need to make sure that all concerns to privacy are addressed, standards are maintained and a single platform is created for accessing the data which is gradually scaled up and automatically you will see new business models, efficiency and tools emerging. The government has already recognised this and has a huge role to play. Now it is up to us in the private sector to believe what the government is doing is in our best interest and we collaborate and start contributing to it.
COVID-19 has impacted every business globally in the past few months. How is JM Baxi taking that impact and what are the significant things you have noticed?
The COVID-19 journey began for us, just like any other exim player, probably in February. China in the Fareast was very badly impacted then, Korea and Japan also started to reel under some of the strains. We started seeing the impact in terms of volumes in February and we had a head start in terms of awareness that this is soon becoming a global challenge. in early March we had put in place strong business continuity programme and because of our large exposure to the technology space, we already have a very strong remote working capability. This is not something we developed new as we had it a long time back. It was just activating completely the human element for that remote working and business continuity programme just 10 days prior to the official lockdown.
But the actual challenge started after the lockdown started wherein we witnessed in our logistics, shipping agency business and terminal businesses various restrictions for people to get out of their homes and access facilities, labour became a challenge, a lot of our blue collared team members got impacted in various places, drivers were in short supply. Just to put into perspective before I talk about out performance, I think what COVID-19 did for us was, it made us come to a very honest and stark realisation that in the end of the day we can talk about a large amount of capital spent, capacity creation, technology, phenomenal processes and growth, but at the core we are a cargo handling company and we are blue collared business and this is very different from the thought process that we had about who we were prior COVID-19 and that was a very humbling realisation for us to take our blue collared roots very seriously and we will make sure that we remain strong in this area in terms of productivity and efficiency.
JM Baxi had a strong performance in the COVID-19 quarter, April was obviously a week month, but we had tremendous recover in May to July has been tremendous. On a Y-o-Y basis we grew in the quarter. This is also due to many of our assets that have a lower base compared to our competitors. But we also deal in a lot of commodities that are basic in nature – metal, steel, pig iron, agri-commodities. Movement of these commodities has become stronger during this lockdown. Exports have picked up. We have been able to contribute to 15000 crew changes, which is 60-70% of the Indian crew that are sailing abroad on ships.
We were also able to work with the government for digital bills of lading, further extending the scope of PCS 1X. So the impact of COVID-19 in a sense has been positive as it reaffirmed that the work we were doing in certain areas is in the right direction and in certain areas it brought us back to our roots and made us focus on basics that drive our industry. I think we will come out of it stronger in terms of values, principles and the way we conduct our business.
Recently, CONCOR has shut down some of its units, a large eastern port selling off its assets and another shipping company selling off its coastal services. As a large player how do you see it? What has been happening to the Indian maritime landscape?
We are not a large, but a medium sized player. There have been challenges and for larger players their base is larger and the impact they end-up having can be more severe. In more developed places you have focus more on exim, especially consumer items, automobiles and white goods. These segments are far more impacted than some of the basic commodities where our smaller terminals are based. The landscape is obviously affected and a lot of growth plans will get shelved or slowed down, which is a tricky phenomenon because on one end the government has ambitious targets of privatisation even in the major and minor ports space and there will be a little slowdown on that. But having said that there are companies extremely robust and international conglomerates will continue pursuing opportunities in the Indian landscape to consolidate and add more assets. But there has to be a pinch of caution because there has been a substantial drop in the first quarter and this is going to affect the second quarter. Recovery across the board is not as quick as we were hoping it to be. We hoped the first quarter to take the setback and recovery to start in the second quarter, but when we talk about the Indian exim logistics landscape as a whole, unfortunately it is going to take as two quarters as an industry for recovery.
The government is very sensitive to this and they are actively trying to make projects more attractive even in this difficult environment.
There have been reports that you are looking for equity funds to the tune of $150-200 million. What are your plans here?
Our plans pretty much have remained unchanged. We have been in the market to increase our capital base. We have largely concluded our transactions in the month of March and this month is a red chequered month for the world, so any transaction we had planned to conclude in March has got pushed back and keeping in mind the COVID-19 impact and the appetite globally as there is a lot of uncertainty in the world. So by the time we are in a position to execute a transaction on the equity space it will be delayed till March. We have enhanced capacity in all our facilities over the past 5 years and the past 2 years have been spent to make sure those capacities settle down.
We are trying to deal our organisation to lower levels than we currently are. We are already on a 2:1 Debt to EBITA ratio, but we want to be even lighter as far as leverages are concerned. With the purpose of having the ability then to look for opportunities continuously in the coming 6 months to 3years period we are planning the fund raise to increase our capacity and better meet our customer requirements.
You were looking for expansion in south Asia. Are these plans still on the card?
South Asia will remain a priority area as far as our expansion plans are concerned. I believe India post-COVID-19 is going to grow a lot. The recovery is going to be V shaped and in accordance with that our commitment and focus on India will have to double. I do see great opportunities in Bangladesh, Nepal and Sri Lanka, but India has got lot more things to be done in our space.
