Logging into logistics

Remember that battery powered toy train you had as a kid? And how it went round and round on its tracks? But you ended up with a desk job or as a road warrior. Well, Ajay S. Mittal is one lucky man—he started off with the usual stuff, like an MBA from the US and a stint in the family business, before moving away to do his own thing, but now is the proud owner of entire goods trains.

Mittal’s first foray was as a trader in chemicals and petrochemicals. But when the flow of information through the Internet and e-mail left his margins in tatters in just five years, Mittal figured he could get clients to pay a premium for on-the-dot delivery of promised goods. “Premium on information became higher than trading ,” recalls the 45-year-old Mittal, who is Chairman and Managing Director of Arshiya.

Mittal realised the importance of logistics in a booming economy crippled by bad infrastructure. But he had no experience in logistics, so he roped in BDP International, the US-based global logistics major, in 2000 as a partner and put Rs 50 lakh on the table. BDP India, as the foray was called, began with plain vanilla freight business, even as Mittal continued his trading business.

ARSHIYA INTERNATIONAL

BUSINESS: Logistics, IT solutions, distripark, free trade warehousing zone, railways

TURNOVER: Rs 500 crore

TURNING POINT: When his earnings from tracking consignments for clients overtook trading profits.

LESS-KNOWN FACT: Family businesses Mittal Builders and Trade-Wings operating for over 50 years.

LEADERSHIP POTENTIAL: India’s only integrated logistics service provider.

“With free trade warehousing zones, one European client will double its imports to $6 billion” - Ajay S. Mittal, Founder, Arshiya International

Pretty soon, Mittal could see the money in the glaring gaps in the logistics chain. Globally, the logistics business was in parts rather than a complete chain.

Mittal now decided to concentrate fully on logistics and sold the trading business. So, in 2004 he decided to make BDP India an integrated logistics solution provider with services like supply chain, free trade warehousing, railways, IT solutions and so on. His client list grew—DuPont, BASF, AMD, Reebok, Mahindra & Mahindra, Videocon…

In 2006, Mittal acquired a listed firm, IID Forgings, and renamed it Arshiya International after his daughter, and merged BDP India with it.

Mittal sees huge potential for logistics service providers and says India can become a global hub for trading if one can put in place better logistics infrastructure.

Arshiya is now setting up free trade warehousing zones (FTWZs), where it will provide space to manufacturers, warehouses, exporting and importing of goods and all the documentation required by government and other agencies.

Arshiya has even bigger plans in railways: Mittal plans to own at least 30 rakes (they are running four rakes currently) and operate them on Indian Railways’ network.

However, some analysts are a bit concerned over these two businesses. “We maintain our concern over the feasibility of FTWZ and profitability of the domestic rail business,” says a B&K Securities report.

Realising the importance of technology in such services, Mittal has set up a Singapore-based IT subsidiary, Cyberlog Technology.

Some of the services that he started, including the FTWZ, were born out of his interactions with customers. Mittal says one Arshiya customer imports $3 billion (Rs 14,400 crore) of goods from India into Europe, from where it exports to various parts of the world after value addition.

But India’s famed logistics problems restrict the volume of the imports. Once the FTWZ begins operations next year, imports will double to $6 billion (Rs 28,800 crore) a year—with all the value addition being done in India at Arshiya’s FTWZ.

Arshiya has plans to invest Rs 3,000 crore over the next 18 months in setting up five FTWZs and buying 30 railways rakes. The recent slowdown in the global trade has not deterred Mittal: he claims his volume growth was 30 per cent in the last fiscal.

His revenues come from movement of goods, IT solutions and distriparks; railways will chip in this year and FTWZs— for which it has government approval—from next year.