Pristine Logistics & Infraprojects Limited has announced plans to go for an IPO of shares in September. The funds raised will be used to reduce debt, as the rail logistics firm looks to become “fit and ready” for growth in a sector facing infrastructure deficit in the hinterland.
“There is a huge deficit of cargo terminals and multi modal logistics parks in the hinterland. It’s hardly there, whatever is there, is concentrated in the National Capital Region (NCR) and Northern India. There is a whole continent out there to be provided with infrastructure and there are very few companies which are really focussing their energies on this, and we are one of them,” said Amit Kumar, who along with Rajnish Kumar, his batchmate from the Indian Railways Traffic Service (IRTS), co-founded the firm in 2008.
The Indian Railways seeks to raise its modal share in freight from 27 percent to 45 percent by 2030 as part of a commitment to reduce carbon emissions. Pristine Logistics & Infraprojects is looking to tap opportunities this target entails.
“The challenge in meeting the goal of 45 percent market share is to get enough rail-linked multi-modal terminals. Currently, there are 80-90 inland container depots (ICDs)/private freight terminals (PFTs) in the country including those of Concor. That’s extremely low. A location like Kanpur is catering to all the catchment from Varanasi to Ghaziabad. You can’t have something like this continuing for long and think about reducing the logistics costs from 14% to 8-9% of the GDP. It’s not going to happen unless you have more terminals in the hinterland. India requires ICDs/PFTs in another 200 locations. Pristine is focussed on creating more terminals,” Amit stated.
“The proceeds from the IPO will be used to deleverage the company. We will be almost a zero-debt company. The idea behind that is to make us future fit and ready for growth,” Amit told ET Infra in an interview.
The company backed by private equity firm Global Infrastructure Partners India Pvt Ltd runs five logistics parks, including rail linked logistics parks, comprising private freight terminals, inland container depots and a dry port, strategically located near key industry clusters in the districts of Kanpur, Ludhiana, Patna, Siliguri and Birgunj (Nepal). The Birgunj ICD is the only rail-linked container terminal connecting Nepal and India.
The Company’s facilities can handle 6,48,000 twenty-foot equivalent units or TEU’s a year. In the nine months of FY22, the company’s terminals handled 1.92 lakh TEUs of containerised cargo and 12.53 million tonnes (mt) of non-containerised cargo.
Pristine Logistics & Infraprojects has been growing at about 24 percent in profit and 36 percent in EBITDA over the last four years. In the nine months of FY22, the company clocked revenue of Rs501 crores and EBITDA of Rs 96.5 core.
The firm has received a letter of intent for setting up a PFT at Mansi in Bihar and is also constructing a PFT at New Rewari along the Western dedicated freight corridor, which will be operational by the end of the next financial year.
The Mansi terminal would be linked to an operational food park while the New Rewari terminal is expected to act as a trans-shipment hub.
Pristine Logistics & Infraprojects also owns warehousing area of some 9,05,000 square feet, and runs about 2,624 domestic standard containers, 395 dwarf containers,390 trailers and 43 rakes.
It also has a Category I license from the Indian Railways to run container trains for export-import-focussed operations across the NCR/Ludhiana to Mundra/Pipavav route, Kanpur to Jawaharlal Nehru Port/Mundra route, Siliguri to Kolkata route and Visakhapatnam/Kolkata to Birgunj route.
In March this year, a lenders panel approved the resolution plan placed by Pristine Logistics & Infraprojects to buy debt laden Sical Logistics Ltd for about Rs400 crore under India’s bankruptcy law. The deal is pending approval from the National Company Law Tribunal (NCLT), which is expected shortly.
Sical Logistics, a Rs350 crore turnover company, runs container trains, container freight stations, 3PL, and warehouse management. It mainly operates in South India, particularly at Ennore, Mangalore, Tuticorin and Chennai, and conducts stevedoring operations at Visakhapatnam port.
“Our current operations in South India are limited, and with the acquisition of Sical, we intend to make a strong entrance into the logistics sector in this geography where organised hinterland infrastructure is scarce,” says Rajnish Kumar, who is familiar with the market in South India having worked in Chennai for some three years during his stint with Concor.
Sical, according to Rajnish, will help Pristine Logistics gain a pan India presence. The deal will be funded through internal accruals.
“It is an extremely strategic acquisition. More importantly, in the South, except for Concor, today nobody is present. We can create a good hub and spoke system in the South. With 300-400 kms of road and rail combination, it can work well. We would be looking at linking the North and the South in terms of transportation and logistics products besides the classical business of linking ICDs in the South,” he stated.
Pristine Logistics will become a 10-terminal company in about 2 years with the acquisition of Sical Logistics and when the two new terminals are constructed.
“In this space, we will then have the most terminals after Concor,” Rajnish said.
The company plans to almost double its rakes from 43 in three years besides expanding the fleet of container rolling-stock and other commodities.
Pristine Logistics & Infraprojects has stayed clear of setting up facilities in locations that have intense competition which will then create “pricing pressures”. It intends to focus on under-serviced geographies witnessing rapid economic growth, particularly in the Eastern, Central and Southern regions of India.
In terms of competition, there are not many companies which compete directly with Pristine Logistics.
“That is because in our sector, competition is very location specific, there is no pan India competition. At Birgunj in Nepal, we compete with those who are present there. Incidentally there is none. At Siliguri, there is no one. At Kanpur, we compete with another entity. In Ludhiana, it is a competitive landscape, we are one out of five there. So, it’s all about where you are present. My location at Kanpur doesn’t compete with, let’s say, an ICD in the NCR because they cater to a completely different set of customers,” said Amit.
Pristine Logistics has also shied away from the sectoral trend of building high capex terminals in upwards of Rs150-200 crore.
The five terminals it has operationalised are low capex terminals, the costliest among them is at Ludhiana, which was built at a cost of 110 crore.
Explaining the strategy behind this approach, Amit said: “We are not looking at creating mega terminals spread across hundreds of acres. We are looking at creating what we call smart terminals, and our focus is on creating more terminals rather than one large or few large terminals,” he said.
“We call that smart allocation of resources. We would rather have our smart terminals utilize capacity much faster. So, we look at creating terminals in 35-40 acres of land and then inter link it by rail. That’s the differentiator,” he pointed out.
In the container train business, Pristine Logistics is seen as a “neutral player”, helping it forge long-term strategic associations with shipping lines such as Maersk, CMA-CGM, Hapag Lloyd and ONE that allows the ocean carriers to offer specialised products to customers like block trains for their end-to-end play.
The company is looking at running double stack container trains, which will reduce container shipping costs for trade and enhance the competitiveness of ICDs, and rail linked terminals.
“Double stacking container trains is one thing we want to do. The upcoming New Rewari PFT is going to give us that presence. Double stacking will give bottom line protection to the company. For example, this year we will end up with an EBITDA margin of 20 percent plus. Our target is to reach 26 percent, that will come through running double stack container trains,” said Rajnish.
The company is keen “to do something” on the domestic side as well.
“We have started domestic containerisation and around 15 percent of our rail top line is coming through that. But it is something where we can do much better,” quips Amit.
It has developed a special type of container called dwarf container for carrying light weight commodities such as polymers, FMCG products and others which helps provide higher margins and efficiency.
Warehousing is another growth area which the company is eyeing.
Pristine Logistics has 9,05,000 sq feet of warehousing while Sical Logistics has some 6,00,000 sq ft in Bhiwandi in Maharashtra through a subsidiary named Patchems Pvt Ltd – an integrated third-party logistics services firm focussed on pharmaceutical, medical devices, lifesaving products and consumer healthcare industries.
“Patchems runs a fulfilment centre, end-to-end logistics for pharma companies such as Johnson & Johnson and Baxter. With the Sical deal, we will have a warehousing capacity of 1.5 million sq ft very soon. We believe that we could easily create 4-5 times of that warehousing capacity,” said Rajnish.
The company has land parcels in Bangalore and Chennai, some of which it plans to utilise for building warehousing space.
“The margins in the warehousing business are relatively low vis-à-vis terminals. But, with land coming at the right price, that margin can also be improved, that is an area we are looking at,” says Rajnish.
Pristine is also working on the India-Nepal and the India-Bangladesh rail business.
“We have a terminal at Birgunj in Nepal, but we are not running bilateral trains. Currently, we are only carrying third country cargo, where we have a market share of over 50 percent. There is a lot of business in the India to Nepal sector. That is another growth area we are looking at particularly after the bilateral India-Nepal Rail Services Agreement signed in 2004 was amended last year permitting container train operators other than Concor also to run trains between the two countries,” Rajnish added.
The planned share-sale comprises fresh issue of equity shares worth Rs 250 crore and an offer for sale of 20,066,269 equity shares by promoters and existing shareholders, according to the offer document, which is awaiting nod from the Securities and Exchange Board of India (SEBI).
