Damco eyes acquisitions in freight forwarding biz

Written by Nikita Upadhyay | Nikita Upadhyay | Mumbai | Updated: Jul 5 2011, 08:24am hrs
Damco, the $2.7-billion logistics unit of the AP Moller-Maersk Group, is scouting for acquisitions in India to expand its freight forwarding business, at a time when the containerised cargo segment is growing at 12-15% annually on the back of improved economic activity. India contributes 5% to Damcos total ocean and supply chain management volumes, and around 10% to its total global air freight volumes.

This year, we will be making investments in the warehousing space and also expand our freight forwarding business inorganically, said Lars Sorensen, South Asia CEO of Damco. We will look at a player with an Indian base and with a significant presence in air and ocean freight, he added, declining to share specifics. As a group, last year our net profit was about $5 billion, so the size of acquisition is not a worry for us, he said.

The company has a wholly-owned subsidiary in the country Damco India which currently operates in supply chain management, freight forwarding, ocean freight forwarding, warehousing and trucking space, with 480 employees. Currently, retail, heavy engineering, FMCG and automobile are the segments that contribute heavily to Damco Indias revenues. The company is also looking at expanding services for the chemical segment and feels this vertical is huge in India. It has already roped in Tata Chemicals and Galaxy in the chemical segment. Currently, it has about 150 trucks on long term contracts of about a year. We are planning to take this count up to about 600-700 in the next 1-2 years, Sorensen said.

With GST and FDI in retail around the corner, the company is formulating a strategy to enter the warehousing space in a bigger way. Till now, we had negligible presence in the warehousing arena. However, we are forming a strategy, which will be announced in the coming four-five months from now. We might go in for six-eight warehouses and have one centrally located either in Nagpur or Hyderabad, he explained.

Damco India also boasts of being the leader in the container cargo business in India. We carry about 75,000 TEUs (twenty-foot equivalent units) a year. Our ocean freight volumes alone will touch 65,000 TEUs this year. Maersk Lines carries 37% of our total volumes, he added.

Companies dealing in containerised cargo such as Concor, Gateway Distriparks and Allcargo, amid others, are at an advantage due to the healthy growth that this segment is witnessing. Annually, the containerised cargo segment clocks an annual growth of about 12-15%. Like the shipping sector, this segment has no over-capacity threat, said Dipen Shah, senior VP, private client group, Kotak Securities.