Towards Bigger Ports Of Call

ESSAR Logistics (EL), a wholly owned subsidiary of Essar Shipping Ports and Logistics (ESPLL), provides end-to-end logistics services — from ships to ports, lighterage services (transporting heavy loads on flatbottom boats, especially on canals), intra-plant logistics and dispatching finished products to the Essar Group, which contributes 98 per cent to its revenues.

It has an average top line growth of nearly 100 per cent over the past four years, and reported revenues of Rs 1,286 crore in fiscal 2011 handling 16.56 million tonnes of cargo.

Analysts believe Essar Logistics will ride on the back of growth in Essar Group's oil, steel and power businesses. "The logistics company is currently focused on meeting the requirements of various Essar Group companies. The quick ramp-up in capacity in each of these businesses and the ongoing project expansion activities have helped the top line growth substantially," says A.R. Ramakrishnan, director of ESPLL. However, the company is now actively bidding for external cargo movement projects. "While Essar Group-related cargo movement will be a focus area, extending logistics services to other clients shall be a growth area," says Ramakrishnan. But it is easier said than done.

The third-party logistics (3PL) services sector is already crowded with well-established multinational players such as Blue Dart and FedEx, and getting a toehold will be tough.

Of course, Essar Logistics has considerable expertise in handling 3PL services for Essar Group's steel plants, multimodal dispatches of steel products from the plant, as well as distribution management for its service centres and the hypermart network. At present, the movement of steel products in the form of coils, plates and pipes is the largest revenue segment for the company.

Another major source of revenue for the company is managing transportation of heavy cargo originating from various international and indigenous sources up to the production site.

Essar recently announced the de-merger of its ports and shipping business. While ESPLL will now be called Essar Ports; the spun-off unit, named Essar Shipping — with sea transportation, oilfield services and logistics as its units — has already filed an application for a public listing of its equity shares.

Going forward, the company plans to build capabilities in executing turnkey assignments for project cargo movement, container and break bulk movement by railway rakes, and invest in relevant stockyard infrastructure.

(This story was published in Businessworld Issue Dated 23-05-2011)