Container Corp Of India Sees Strong FII Interest

Foreign institutions’ interest in Indian logistics major Container Corporation is increasing day by day. They have been increasing their stake in the company in a sustainable manner over the past three months, and the FII holding in the company has now reached the maximum allowable threshold limit of 30%. Now, FIIs have requested the company management to allowing more FII holding into the company. What’s interesting is that out of the 37% public shareholding in this public sector company, 30% is now held by FIIs.

The company management seems overwhelmed yet cautious over such tremendous FII interest in the stock. Says AK Gupta, CMD of the company, “We receive FIIs’ representatives on a daily basis, and they have only a single point demand, which is to increase the FII holding limit in the company”. Of course, once the FII investment threshold limit has been crossed, every further investment will require an approval of the RBI.

Some amount of investigation into the company’s business tells us that FII interest in the company is far from surprising. Concor is the largest logistics company in India and enjoys a monopoly in its domain. It currently has 62 Inland Container Depots (ICDs) and container freight stations.

The company is also coming up with a large logistics park in Rewari, Rajasthan. “This 270-acre facility is a one-stop solution for all the logistics need of companies, and when completed, would be one of its kind in India. We are investing around Rs 475 core into the facility”, Gupta tells us.

This capacity is strategically located on the DFC (Dedicated Freight Corridor) connecting Delhi and Mumbai, and would certainly be a game-changer for the company. So far, ICD Dadri was the largest facility of Concor, but going forward, the Rewari facility can mint money for the company as new facilities will be provided to the companies that establish there. “Already, South Korean and Japanese industrial groups have expressed interest and are setting up their facilities in the park”, adds the CMD.

Considering this, the total investment into this project would cross Rs 800 crore. The company has already started commercial operations in the facility, with marginal revenues coming in. It is expected to achieve 50% capacity utilisation by FY17, when DFC is expected to come up. In addition, Concor is also setting up a container facility in Pantnagar, Uttarakhand, at Rs 100 crore, which will be started soon. During FY13, it has undertaken a total capex of Rs 940 crore, which clearly shows the aggressiveness of the government and the company in building infrastructure.

As far as business environment is concerned, we have seen a decent improvement in Q2 owing to increase in exports. During this period, the company’s topline also rose to Rs 1254 crore, up 19% from the corresponding period last year, while the PAT increased by 4% during the same period.

The stock is trading at Rs 720 on the bourses, and seems very attractively priced, as the company has a PAT margin of over 21%. Considering its future plans and the need for logistics in the Indian economy, FIIs’ interest seems well founded for sure.