On high ground Container Corporation of India - The Smart Investor

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Container Corporation of India Ongoing structural trends that portend well for CTOs Ongoing structural trends towards increasing containerization and rail transport of containers bode well for CTOs in general and CCRI in particular. • Structural move towards containerization Currently, the share of container traffic in India is very low (~15% of total traffic) compared to developed countries (~70% of traffic). Nonetheless, the share of container freight in India has been steadily increasing over the years (10% in 2000 to ~15% in FY12). Container traffic in India has grown at a CAGR of ~14.3% over FY02-12, compared to port traffic growth of ~9.4%. Growth has been boosted by increasing contribution of non-major ports from 28.4% in FY08 to 38% in FY12. Maritime Agenda 2020 estimates that container trade in India would grow at a CAGR of 15% over FY10-20. The need to aggregate cargo, which is currently moving piecemeal in bulk form to ports for containerization The structural trend towards increased containerization in India is driven by: ‣ The need to aggregate cargo, which is currently moving piecemeal in bulk form to ports for containerization, aided by the development of new rail freight terminals/ ICDs/PFTs and logistics hubs, which would make it amenable to rail movement. ‣ Economic development, leading to a shift in trade from raw materials to finished goods, requiring containerization. ‣ Removal of current infrastructure bottlenecks (ports in particular) and development of other modes of transport (coastal shipping, etc). Share of container trade steadily increasing Growth of container freight Source: IPA/MOSL 15 October 2012 20
Container Corporation of India The share of rail transport in overall freight movement has been declining steadily from ~89% in FY51 to 53% in FY87 to ~28% currently • Move towards ‘rail transport of containers’ The share of rail transport in overall freight movement has been declining steadily from ~89% in FY51 to 53% in FY87 to ~28% currently. There has been little investment in track infrastructure since independence. While route kilometers have grown at a CAGR of just 3%, freight and passenger traffic has grown at a CAGR of ~52%. This has led to most high density corridors becoming oversaturated, negatively impacting CTO industry demand. Top seven key routes account for ~50% of the freight traffic in India. Increasing share of non-major ports in container traffic and infrastructure development around these ports should aid development of new routes and result in lower pressure on existing high density traffic routes. Key routes are congested, negatively impacting rail transport (%) Top seven key routes account for ~50% of the freight traffic in India Source: Industry, MOSL The top-4 ports in India currently account for ~87% of container demand CCRI key player across key EXIM markets CCRI is the key player across key EXIM markets, with a lion’s share of the container rail traffic across the four major ports of India. The top-4 ports in India currently account for ~87% of container demand. JNPT alone accounts for 41% of the container trade in India. New private ports such as Mundra and Pipavav are growing faster than the major ports and have been steadily increasing their market share. CCRI has been following the shift in trade and has steadily been increasing operations around these new ports. Consequently, the share of volumes from JNPT has been steadily declining for CCRI (~75% in FY08 to ~55% in 1QFY13). Four ports account for bulk of container rail traffic % container % of total % traffic Total Rails Trains Export/ handling as % container transported deployed deployed Import Mix of total capacity industry trade by Rail /Day by Concor JNPT 90 42 25-30 ~20* 12 50% /50% Chennai 26 22 5 ~2 ~2 49% /51% Mundra 28 11 20-25 ~10 5 54% / 46% Pipavav 70 12 30-35 ~9 4 50% /50% Total 87 *27 trains possible Source: Company, MOSL 15 October 2012 21
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