India’s leading business house, the Tata Group, sees huge opportunities in the business of logistics, but says DIESL, its logistics vertical, will have to compete with other houses to win its business.
Tata Group spends about $5 billion (R22,500 crore) a year in logistics, but DIESL will have to win bids to get that business, Kishor Chaukar, MD, Tata Industries, told Hindustan Times.
“The opportunity is there for DIESL, but the company has to be competitive to get business from other Tata companies,” Chaukar said.
The importance of logistics to Tata Group can be seen from the fact that Noel Tata, who is widely tipped to be the group's next chairman, was recently appointed chairman of DIESL.Asked if he sees logistics becoming as large as the big businesses of the group, Chaukar said it has the potential as the industry, which is largely fragmented, will get consolidated in future.
“Logistics is one area where I think there will be exponential growth,” he said, adding that the company may also look for inorganic growth as consolidation is on the cards in the industry. “People will move towards organised service providers like us when GST gets implemented next year and one of the impacts will be consolidation,” he said.
DIESL, a R300-crore company by turnover, is expected to grow three-fold over five years to become a R1,000 crore company. As of now half its revenues come from Tata companies.
Acquisition of large companies can be another growth strategy, but “picking up a R10-20 crore company does not make sense,” Chaukar said. “We will look for R200-500 crore companies but that opportunity does not exist. Someone will have to consolidate the smaller ones.”
DIESL will benefit from the experience and expertise of Noel Tata, who ran Trent for several years and is now at Tata International. Logistics management is a key activity in both businesses.
“Our focus is on sectors such as retail, telecom, FMCG, automotive and bulk logistics,” Chaukar said. “Big money being spent on infrastructure, building of dams, power stations, ports, bridges and all of it requires logistics. We are preparing to get into that sector.”