Aegis Logistics : Moving Forward With Speed And Efficiency
Success in the logistics industry translates to increased efficiencies, lower costs, higher production, better inventory control, smarter use of warehouse space, increased customer and supplier satisfaction and an improved customer experience. This is where Aegis Logistics scores several points
I ncorporated in 1956, Aegis Group is a key player in India’s oil and gas sector, and its flagship company, Aegis Logistics Ltd., is India’s leading oil, gas and chemical logistics company. The group has five distinct but related business segments including liquid logistics, gas logistics, engineering, procurement and construction (EPC) services, retail LPG and marine. The liquid logistics segment operates a network of bulk liquid handling terminals, liquefied petroleum gas (LPG) terminals, filling plants, pipelines and gas stations to deliver products and services. The terminals are located in Mumbai, Kochi, Pipavav and Haldia. In case of its gas logistics segment, it is engaged in the sourcing, shipping and distribution of LP gases and propane into India.
It handles more than 700,000 MT of LPG per annum and expects this to continue rising as India’s demand for energy increases. The company launched its EPC services division in response to the growing trend of outsourcing in the oil and gas sector. Its marine division’s mission is to provide quality bunker fuels to ships calling at Indian ports while ensuring high quality standards. The company’s clients include leading companies like Bharat Petroleum, Hindustan Petroleum, Reliance Industries, Caltex and Supreme Industries as well as individual retail customers. It also operates internationally through its sourcing and trading subsidiaries located in Singapore.
Sector Overview
In business, success in logistics translates to increased efficiencies, lower costs, higher production, better inventory control, smarter use of warehouse space, increased customer and supplier satisfaction and an improved customer experience. Hence, in today’s world, logistics is considered as the backbone of an economy. Order processing, materials handling, warehousing, inventory controls, packaging and transportation are the basic activities that are carried out in the logistics industry. The pandemic is leaving its footprint on most of the industries in the world. Obviously, the impact on the transport and logistics sector is big, ranging from supply chain disruptions to major effect on the country’s GDP.
Now, the global as well as domestic logistics sector recovery is entering a new phase and economists are expecting substantial growth in 2022 despite the war in Ukraine and continued supply chain disruptions. In 2020, the global logistics market was worth almost USD 8.6 trillion. With roughly USD 3.9 trillion, the logistics market in the Asia Pacific region is the largest one globally. North America was the second-largest region, accounting for approximately USD 2 trillion. In FY 2021, the size of the Indian logistics sector was around USD 250 billion. It was estimated that this sector would grow to USD 380 billion in 2025 at a CAGR of 10-12 per cent. Container Corporation of India, Transport Corporation of India and Blue Dart Express Ltd. are some of the biggest players in the logistics industry in terms of market capital as well as their revenue.
Financial Overview
Considering the financial performance of the company recorded for the fourth quarter of FY22, on a consolidated basis, Aegis Logistics recorded net sales and other operating income of ₹2,103.58 crore, posting growth of 108.03 per cent from ₹1,011.17 crore reported in Q4FY21.
On the other hand, the operating profit was recorded at ₹156.58 crore in Q4FY22 as compared to ₹115.09 crore in Q4FY21. Q4FY22 recorded net profit of ₹102.12 crore compared to ₹69.98 crore in the same quarter the previous year, indicating a strong increase of 45.93 per cent. In terms of its yearly performance, Aegis Logistics recorded net profit of ₹384.94 crore as against ₹249.22 crore during the previous year ended March 2021, posting an increase of 54.46 per cent.
Also, net sales surged by 20.49 per cent to ₹4,630.98 crore as against ₹3,843.46 crore during the previous year ended on March 2021. The company’s Board of Directors has recommended payment of interim dividend of 200 per cent on the equity share capital i.e. ₹2 per equity share of the face value of ₹1 each for the financial year ended March 31, 2022, subject to approval of the shareholders. Promoters held 58.07 per cent stake in the company as of March 31, 2022. Institutional investors have a total stake of 17.21 per cent, out of which foreign institutional investors (FIIs) owned 15.03 per cent. Non-institutional investors have total stake of 24.72 per cent.
Various growth ratios like EBIT, PAT and EPS witnessed a minor decline during the year 2020-21 and 2021-22 as the business witnessed a disruption due to the first and second wave of the pandemic. However, the company was able to rebound from the crisis. Its net sales and profit margins have been continuously growing with each passing quarter. To gain additional financial overview, we have analysed five companies in the logistics sector having market capital of nearly between ₹3,000-7,000 crore. Aegis Logistics, Allcargo Logistics, Mahindra Logistics, Sindhu Trade Links and VRL Logistics were the companies chosen for the study. Aegis Logistics outperformed other companies as it delivered higher ROA, ROE and ROCE than the others.
Outlook
The Union Budget 2022 emphasised the execution of the PM Gati Shakti National Master Plan, encompassing the seven engines for economic transformation and logistics efficiency. These seven engines are roads, railways, airports, ports, public transportation, waterways and logistics infrastructure. Better infrastructure, improved logistics and higher economic growth are directly co-related. Hence, the PM Gati Shakti National Master Plan is what our current state of logistics sector needs. Not only this, but the development of multimodal logistics parks, 100 cargo terminals and increased speed of goods train by Indian Railways will augment the sector. The National Logistics Policy (NLP) is the right step taken by the Indian government in the direction of removing inefficiencies in the sector.
Also, the Parivahan portal and introduction of E-Way Bill will help the sector in the future. There are many sources of growth but the major four growth drivers in the logistics industry are globalisation, customer expectation and demand, growth of e-commerce and cloud-based solutions. Cloud-based operations have helped the supply chain management to grow from small-scale operations to comprehensive businesses. It is a powerful solution as supply chain involves big data to operate efficient management and tracking. Strong expansion aided by various government reforms in the transportation and logistics sectors is projected to be the primary key driver of India’s logistics business. Meanwhile, GST has transferred all manual transactions to the digital form, utilising e-way bills and toll Fastag to increase system transparency. Numerous start-ups in the logistics sector have aided the growth of the business by introducing a more innovative solution to the market.
On the flip side, there are some challenges too that are faced by Indian logistics companies. Some of them include receiving bulk load of orders, transportation roadblocks due to terrible roads, lack of skilled personnel, port and shipping problems, poor warehousing facilities and huge competition with the global giants. Aegis Logistics has been in the comfortable position of operating in various business segments and with leading industrial clients. It now plans to expand its operations and tap new markets while also striving to meet health, safety and environmental standards in order to be a business leader. Considering the positive long-term outlook for the logistics industry as well as the opportunities lined up for Aegis Logistics, we recommend BUY.