Concor: betting on built infrastructure

Updated: Aug 30 2008, 08:24am hrs
Concor has delivered a mild growth of 6% and 8% in topline and bottomline respectively for the June quarter of FY09, despite being the largest railway container freight operator.

The company commands 90% market share in the container freight sector. Its biggest advantage is its built infrastructure, equipped with 58 inland container depots and over 150 rakes (8500 wagons). This also constitutes a barrier for new players.

For, those seeking to gain an entry into this business would find it difficult to acquire land given rising land prices (more than three times in the past five years).

In addition to a crunch of vast tracts of land at strategic locations, such as near industrial belts and ports, getting regulatory clearances from concernered authorities for setting up inland container depots are time consuming. This forces other players to go co-operate and share resources with Concor, as was witnessed in the case of Gateway Distriparks.

Analysts expect competition to pick up gradually because it takes 2-3 years to build railway infrastructure. The freight sector in railways was opened for private operators in 2007.

Despite the stiff entry barriers, Concor could see increased competition from players like Maersk, DP World and Adani group who have lately entered the railway container space.

Being the leader of the sector, Concor has also got the pricing power and has already increased tariffs by 15% this August. It is investing in port terminals and similar infrastructure to grow its business. Most of the company's revenues are generated from exim business.

On the flip side, Concor's margins could stagnate in the near future due to competition and rebates given to the customers. The fact that integrated operators have emerged and cargo delivery system has witnessed a shift from port-to-port to door-to-door (multimodal transport) could spell stiff competition for Concor.

Contributed by Rahul Jain