Industry Report

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Knight Frank Knight FrankIndustry Report 2008 Industry Report 2008

Industry Report

2008

Research

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Contents

Executive summary ...................................................................................................................2

Overview ...................................................................................................................................4

Industrial sector ........................................................................................................................9

Special Economic Zone............................................................................................................14

Logistics and Warehousing .....................................................................................................17

Outlook ....................................................................................................................................33

Glossary ...................................................................................................................................38

Bibliography ............................................................................................................................39

Annexure .................................................................................................................................40

• Industrial Park/Industrial Estate.................................................................................................................................................................5

• Special Economic Zone ............................................................................................................................................................................6

• Logistics and Warehousing.......................................................................................................................................................................7

• North.......................................................................................................................................................................................................9

• East........................................................................................................................................................................................................10

• South.....................................................................................................................................................................................................10

• West ......................................................................................................................................................................................................12

• Investment scenario in logistics sector....................................................................................................................................................17

• Regulatory framework governing logistics and warehousing operations in India.....................................................................................18

• North.....................................................................................................................................................................................................19

• East........................................................................................................................................................................................................21

• South.....................................................................................................................................................................................................22

• West ......................................................................................................................................................................................................24

• Brief on major infrastructure projects in India .........................................................................................................................................26

• Case Study: Transport Corporation of India Limited (TCI).......................................................................................................................30

State comparison chart .............................................................................................................................................................................40

01

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Contents

Executive summary ...................................................................................................................2

Overview ...................................................................................................................................4

Industrial sector ........................................................................................................................9

Special Economic Zone............................................................................................................14

Logistics and Warehousing .....................................................................................................17

Outlook ....................................................................................................................................33

Glossary ...................................................................................................................................38

Bibliography ............................................................................................................................39

Annexure .................................................................................................................................40

• Industrial Park/Industrial Estate.................................................................................................................................................................5

• Special Economic Zone ............................................................................................................................................................................6

• Logistics and Warehousing.......................................................................................................................................................................7

• North.......................................................................................................................................................................................................9

• East........................................................................................................................................................................................................10

• South.....................................................................................................................................................................................................10

• West ......................................................................................................................................................................................................12

• Investment scenario in logistics sector....................................................................................................................................................17

• Regulatory framework governing logistics and warehousing operations in India.....................................................................................18

• North.....................................................................................................................................................................................................19

• East........................................................................................................................................................................................................21

• South.....................................................................................................................................................................................................22

• West ......................................................................................................................................................................................................24

• Brief on major infrastructure projects in India .........................................................................................................................................26

• Case Study: Transport Corporation of India Limited (TCI).......................................................................................................................30

State comparison chart .............................................................................................................................................................................40

01

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Knight Frank Knight FrankIndustry Report 2008 Industry Report 200802 03

Executive SummaryIndia has emerged as one of the prime investment destinations of the world in recent years. Led by strong economic growth, India today stands as the

10th largest economy in the world and 4th largest in terms of Purchasing Power Parity. The country has a large reservoir of skilled manpower at

internationally competitive cost owing to the presence of a number of technical and management institutions of global standards. This, coupled with a

large entrepreneurial base and a diversified manufacturing structure, makes it easy to attract investments into the country.

A vibrant economy with a large democratic setup, a broad based legal framework including arbitration and an independent judicial system along with a

vast network of bank branches, financial institutions and well-organised capital and money markets makes India a favourable destination for

investments. More importantly, India has always met its international financial obligations as per schedule and has never been a defaulter. Strategic

location of the country for the third world markets particularly for the rapidly growing South and South East Asian countries together with a supportive

infrastructure base helps in generating a healthy environment for Foreign Direct Investments (FDI) inflow into the country.

The Indian economy is predicted to become one of the world's largest by 2050 A.D, this is based on a strong GDP growth rate of above 8% initiated by

a rebound in Indian agriculture and presently being boosted by a boom in manufacturing and service industries. As many as 15 industries out of 17

have shown positive growth in February since the past year. Jute, vegetable, fibre and textile sectors showed the highest growth of 86.4% followed by

18.8% in leather and fur products, and 18.2% in metal products and parts category. The power sector is witnessing a steady growth of 9.8%, while the

manufacturing sector is witnessing a slight slowdown in growth, which was 8.6% in February 2008 as against 12% during the same period last year.

Capital goods, the key sector for industrial growth, grew at 10.4% in February as against 2.1% in January, in 2008. In the first 11 months of 2007-08,

the growth in this sector was 17.5%, compared to 18.3% in the same period last year.

In order to further improve the country's export and attract FDI, the concept of Special Economic Zones (SEZs) was introduced in 2000 by the

government. SEZs are pockets of manufacturing excellence which also contribute tremendously to the generation of employment and eventually to the

economic growth of the country. The SEZ policy framework comprise attractive package of incentives, including several fiscal concessions for the

developers of the SEZ and the units to be set up in these SEZs. It has been observed that the private sector has limited experience in development of

these zones, hence most projects are developed under the public-private partnership format, where the state governments concerned jointly market the

zone along with the private developer. India's advantage lies in its strong economic growth prospects, availability of large and skilled workforce,

comparative advantage in several industries, a strong policy framework, availability of supporting ancillary industries, strong growth in the external

sector and a huge domestic market. These factors, combined with a proactive government in marketing the SEZs, will go a long way in providing the

much-needed momentum in development of SEZs and in attaining the objective of boosting India's exports and attracting export related FDI.

Logistics and warehousing is another segment which have been witnessing considerable growth in the past couple of years. The sector is expected to

grow at a Compounded Annual Growth Rate (CAGR) of 6.4% from 2005 to 2012. The entry barriers for providing logistics services in India are rather

low and thus increased competition is expected in the near future. With companies keen to outsource their back-end processes, more corporations are

getting into the business of providing organised logistical services by the way of Third Party Logistics (3PL). This segment is expected to grow at a

CAGR of 21.9% from 2005 to 2012. Companies in India generally outsource only a part of their supply chain requirements to a 3PL service provider;

only a small fraction of companies outsource entirely to a 3PL service provider. Most of these companies are multinationals who do not have an

established network in the country and have to outsource their logistics due to the lack of assets. The degree and nature of outsourcing of logistics to a

3PL service provider varies significantly between verticals and depends greatly on the nature of the company. In the automotive sector, the trend of

end-to-end outsourcing is beginning to significantly catch up as companies have realised the benefits of concentrating on core competencies and

delegating the logistics to 3PL service providers.

In recent times, the IT hardware and electronics sectors have also begun outsourcing to 3PL service providers to a great extent. In sectors such as Fast

Moving Consumer Goods (FMCG) and pharmaceuticals, the penetration of the 3PL concept has been fairly low, owing to already strained profit

margins. Added to this, there is a great deal of decentralisation in the supply chains of these sectors, with many stocking points and strategic

distribution centres spread all across the country. A large number of investment funds are contributing to the growth of logistics companies in the

country with current investment figures standing at Rs. 9.14 billion. Going forward, the warehousing facilities of a 3PL provider are expected to be the

differentiating factor for the service providers. The warehousing segment is expected to grow the fastest among all the logistics functions outsourced to

a 3PL service provider. Currently, it accounts for just 8% of the market share. With improvement in the overall infrastructure in the country, there is

good scope for development of warehousing facility corridors across the country. The phasing out of Central Sales Tax (CST) and the implementation of

Value Added Tax (VAT) is expected to give further impetus to the sector.

Currently the industrial sector is considered to be facing a crisis, the implications of which would be felt in SEZ developments, but the effect is yet to

translate into the logistics and warehousing segments. The current slump in industrial production growth figure which has gone down to 3% is much

lower than the figure of 8.6% witnessed in February and does not bode well for the industry as the earlier apprehension of a major slowdown is

gradually turning into reality. These factors have been kept in mind while preparing the research review.

The objective of this review is to understand the market scenario of the industrial sector from a real estate perspective with special focus on SEZs and

Logistics and Warehousing segments. In the process we have analysed the demand-supply dynamics within various sectors throwing light on the

current market scenario as well as outlining the growth prospects for the future.

The approach followed for the review involved studying established and growing markets within the country with respect to the above mentioned

sectors, primary data survey and analysis along with interaction with representatives of major corporations in the sectors concerned.

This report has been divided into three sections namely overview, zonal classification and outlook. The first section is a prelude to the report and gives

an introduction into each of the sectors highlighting key economic aspects giving brief descriptions of the same.

The second section gives an overview of the industrial sector, SEZs and 3PL focusing on their development and salient features. The section is divided

into three segments and each of them has been discussed separately. In the first segment the industrial sector of the country has been divided into four

zones based on its geographical location. It describes each zone in detail, the key industries present and their investment potential, also stating the

indications as to the factors driving these industries. In the second segment the impact of the SEZs is discussed on a pan-India basis with emphasis on its

current status and where it is heading. It also reviews the current regulatory framework with respect to the sector. The third segment gives a snapshot of

the logistics and warehousing sector in the country with a close look on the current market condition and factors driving the sector. Here, like in the first

segment, the sector has been divided into four zones based on geography. A case study of a prominent logistics player has also been included in the

report to illustrate the sector market.

The final segment features the outlook, which analyses the current status and future potential of each of the three sectors with respect to present

economic conditions, business potential and growth. This information has been used to arrive at a comparative analysis of the logistics market potential

among developing economies. It also gives an insight into the strengths and weaknesses of the sectors.

Methodology

Zones selected for the Industry Report

NORTH ZONE

WEST ZONE

EAST ZONE

SOUTH ZONE

www.knightfrank.com


Executive SummaryIndia has emerged as one of the prime investment destinations of the world in recent years. Led by strong economic growth, India today stands as the

10th largest economy in the world and 4th largest in terms of Purchasing Power Parity. The country has a large reservoir of skilled manpower at

internationally competitive cost owing to the presence of a number of technical and management institutions of global standards. This, coupled with a

large entrepreneurial base and a diversified manufacturing structure, makes it easy to attract investments into the country.

A vibrant economy with a large democratic setup, a broad based legal framework including arbitration and an independent judicial system along with a

vast network of bank branches, financial institutions and well-organised capital and money markets makes India a favourable destination for

investments. More importantly, India has always met its international financial obligations as per schedule and has never been a defaulter. Strategic

location of the country for the third world markets particularly for the rapidly growing South and South East Asian countries together with a supportive

infrastructure base helps in generating a healthy environment for Foreign Direct Investments (FDI) inflow into the country.

The Indian economy is predicted to become one of the world's largest by 2050 A.D, this is based on a strong GDP growth rate of above 8% initiated by

a rebound in Indian agriculture and presently being boosted by a boom in manufacturing and service industries. As many as 15 industries out of 17

have shown positive growth in February since the past year. Jute, vegetable, fibre and textile sectors showed the highest growth of 86.4% followed by

18.8% in leather and fur products, and 18.2% in metal products and parts category. The power sector is witnessing a steady growth of 9.8%, while the

manufacturing sector is witnessing a slight slowdown in growth, which was 8.6% in February 2008 as against 12% during the same period last year.

Capital goods, the key sector for industrial growth, grew at 10.4% in February as against 2.1% in January, in 2008. In the first 11 months of 2007-08,

the growth in this sector was 17.5%, compared to 18.3% in the same period last year.

In order to further improve the country's export and attract FDI, the concept of Special Economic Zones (SEZs) was introduced in 2000 by the

government. SEZs are pockets of manufacturing excellence which also contribute tremendously to the generation of employment and eventually to the

economic growth of the country. The SEZ policy framework comprise attractive package of incentives, including several fiscal concessions for the

developers of the SEZ and the units to be set up in these SEZs. It has been observed that the private sector has limited experience in development of

these zones, hence most projects are developed under the public-private partnership format, where the state governments concerned jointly market the

zone along with the private developer. India's advantage lies in its strong economic growth prospects, availability of large and skilled workforce,

comparative advantage in several industries, a strong policy framework, availability of supporting ancillary industries, strong growth in the external

sector and a huge domestic market. These factors, combined with a proactive government in marketing the SEZs, will go a long way in providing the

much-needed momentum in development of SEZs and in attaining the objective of boosting India's exports and attracting export related FDI.

Logistics and warehousing is another segment which have been witnessing considerable growth in the past couple of years. The sector is expected to

grow at a Compounded Annual Growth Rate (CAGR) of 6.4% from 2005 to 2012. The entry barriers for providing logistics services in India are rather

low and thus increased competition is expected in the near future. With companies keen to outsource their back-end processes, more corporations are

getting into the business of providing organised logistical services by the way of Third Party Logistics (3PL). This segment is expected to grow at a

CAGR of 21.9% from 2005 to 2012. Companies in India generally outsource only a part of their supply chain requirements to a 3PL service provider;

only a small fraction of companies outsource entirely to a 3PL service provider. Most of these companies are multinationals who do not have an

established network in the country and have to outsource their logistics due to the lack of assets. The degree and nature of outsourcing of logistics to a

3PL service provider varies significantly between verticals and depends greatly on the nature of the company. In the automotive sector, the trend of

end-to-end outsourcing is beginning to significantly catch up as companies have realised the benefits of concentrating on core competencies and

delegating the logistics to 3PL service providers.

In recent times, the IT hardware and electronics sectors have also begun outsourcing to 3PL service providers to a great extent. In sectors such as Fast

Moving Consumer Goods (FMCG) and pharmaceuticals, the penetration of the 3PL concept has been fairly low, owing to already strained profit

margins. Added to this, there is a great deal of decentralisation in the supply chains of these sectors, with many stocking points and strategic

distribution centres spread all across the country. A large number of investment funds are contributing to the growth of logistics companies in the

country with current investment figures standing at Rs. 9.14 billion. Going forward, the warehousing facilities of a 3PL provider are expected to be the

differentiating factor for the service providers. The warehousing segment is expected to grow the fastest among all the logistics functions outsourced to

a 3PL service provider. Currently, it accounts for just 8% of the market share. With improvement in the overall infrastructure in the country, there is

good scope for development of warehousing facility corridors across the country. The phasing out of Central Sales Tax (CST) and the implementation of

Value Added Tax (VAT) is expected to give further impetus to the sector.

Currently the industrial sector is considered to be facing a crisis, the implications of which would be felt in SEZ developments, but the effect is yet to

translate into the logistics and warehousing segments. The current slump in industrial production growth figure which has gone down to 3% is much

lower than the figure of 8.6% witnessed in February and does not bode well for the industry as the earlier apprehension of a major slowdown is

gradually turning into reality. These factors have been kept in mind while preparing the research review.

The objective of this review is to understand the market scenario of the industrial sector from a real estate perspective with special focus on SEZs and

Logistics and Warehousing segments. In the process we have analysed the demand-supply dynamics within various sectors throwing light on the

current market scenario as well as outlining the growth prospects for the future.

The approach followed for the review involved studying established and growing markets within the country with respect to the above mentioned

sectors, primary data survey and analysis along with interaction with representatives of major corporations in the sectors concerned.

This report has been divided into three sections namely overview, zonal classification and outlook. The first section is a prelude to the report and gives

an introduction into each of the sectors highlighting key economic aspects giving brief descriptions of the same.

The second section gives an overview of the industrial sector, SEZs and 3PL focusing on their development and salient features. The section is divided

into three segments and each of them has been discussed separately. In the first segment the industrial sector of the country has been divided into four

zones based on its geographical location. It describes each zone in detail, the key industries present and their investment potential, also stating the

indications as to the factors driving these industries. In the second segment the impact of the SEZs is discussed on a pan-India basis with emphasis on its

current status and where it is heading. It also reviews the current regulatory framework with respect to the sector. The third segment gives a snapshot of

the logistics and warehousing sector in the country with a close look on the current market condition and factors driving the sector. Here, like in the first

segment, the sector has been divided into four zones based on geography. A case study of a prominent logistics player has also been included in the

report to illustrate the sector market.

The final segment features the outlook, which analyses the current status and future potential of each of the three sectors with respect to present

economic conditions, business potential and growth. This information has been used to arrive at a comparative analysis of the logistics market potential

among developing economies. It also gives an insight into the strengths and weaknesses of the sectors.

Methodology

Zones selected for the Industry Report

NORTH ZONE

WEST ZONE

EAST ZONE

SOUTH ZONE

www.knightfrank.com


Overview

Fact file

India has been following a highly protective industrial and foreign trade regime since 1951. The liberalisation of Indian economy started gradually in the

1980's with major structural adjustment programs beginning from 1991. Key economic reforms were undertaken with the objective of transforming

regulated economic development to a competitive regime for accelerating economic growth. With positive indicators such as a stable 8-9% annual

growth, rising foreign exchange reserves, a booming capital market and rapidly expanding FDI inflows, India has emerged as the second fastest

growing major economy in the world.

The Indian economy has been growing at an average growth rate of 8.8% in the last four fiscal years (2003-04 to 2006-07), with the 2006-07 growth

rate of 9.6% being the highest in the last 18 years. Significantly, the industrial and service sectors have been contributing towards a major part of this

growth, suggesting the structural transformation underway in the Indian economy.

Industrial and services sectors have logged in a 10.63% and 11.18% growth rate in 2006-07 respectively, as against 8.02% and 11.01% in 2005-06.

Similarly, manufacturing grew by 8.98% and 12% in 2005-06 and 2006-07 and transport, storage and communication recorded a growth of 14.65%

and 16.64%, respectively.

Another significant feature of the growth process has been the consistently increasing savings and investment rate. While the gross saving rate as a

proportion of GDP has increased from 23.5% in 2001-02 to 34.8% in 2006-07, the investment rate-reflected as the gross capital formation as a

proportion of GDP-has increased from 22.8% in 2001-02 to 35.9% in 2006-07.

Financial reforms, coupled with improved infrastructure, are the key factors for this growth. After agriculture it is the industrial sector which is in a

transformation phase from being labour intensive to technology and efficiency enhancement intensive. India is set to reframe its economic structure

inducing technological advancements along with industrial friendly policies. These initiatives are expected to go a long way in promoting industrial

growth in the country.

! Overall industrial production grew by 9% in Q1 and Q2 2007, whereas capital goods production rose by 20.2% compared to 18.6% during same

period in 2006

! Manufacturing grew by 9.6% during Q1 and Q2 2007, on the back of 12.2% growth during same period in 2006-07

! Core infrastructure sector continued its growth rate recording 6% growth in Q1 and Q2 2007

! Exports grew by 21.76% during Q1 and Q2 2007, imports increased by 25.97% in the same period

! Central Statistical Organisation (CSO) expects the economy to grow by 8.7% in 2007-08

! Warehousing and packaging contributes, 26% of the logistics cost in India

! Average escalation in warehousing costs between 2001-2006, has been maximum for the steel industry followed by pharmaceutical and auto

industries

! India spends 13-14% of its GDP on logistics cost, whereas this figure is 7-8% for developed countries

Industrial Park/Industrial Estate

“Industrial Park” means a project in which plots of developed space or built up space or a combination with common facilities and quality infrastructure

facilities, is developed and made available for the purposes of industrial or commercial activities. Any undertaking which develops, develops and

operates or maintains and operates an industrial park may make an application for notification under clause (iii) of sub-section (4) of section 80-IA of the

Act.

The Central Board of Direct Taxes shall process the application for approval and notification by the Central Government and for this purpose it may call

for reports from other departments or agencies, as it may deem fit.

Fact file

An industrial park is divided according to the following activities

• Industrial activity

• Common facility

• Commercial activity

• Infrastructural facility

Industrial Park Scheme, 2008

Criteria for approval

The scheme extends 100% tax holiday on profits derived by an undertaking from the activity of developing, developing

and operating, or maintaining and operating an Industrial Park and is applicable to all Industrial Parks set up between

April 1, 2006 and March 31, 2009.

(1) The date of commencement of the Industrial Park should be on or after the 1st day of April 2006 and not later than

31st of March 2009

(2) The area allocated or to be allocated to industrial units shall not be less than 90% of the allocable area

(3) There shall be a minimum of thirty industrial units located in an industrial park

(4) For the purpose of computing the minimum number of industrial units; all units of a person and his associated

enterprises will be treated as a single unit

(5) The minimum constructed floor area shall not be less than 50,000 sq.mt.

(6) No industrial unit, along with the units of an associated enterprise, shall occupy more than 25% of the allocable area

(7) The industrial park should be owned by only one undertaking

(8) Industrial units shall undertake only manufacturing activity as defined in section D of the National Classification, 2004,

Code issued by the Central Statistical Organisation, Department of Statistics

04 05

Type of industrial park Minimum Number of units to be provided inthe Industrial Model Town/Industrial

Park/Growth Centre

(i) Industrial Model Town 50 units

(ii) Industrial Park 30 units

(iii) Growth Centre 30 units

Table 1: Classification of Industrial Parks

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Overview

Fact file

India has been following a highly protective industrial and foreign trade regime since 1951. The liberalisation of Indian economy started gradually in the

1980's with major structural adjustment programs beginning from 1991. Key economic reforms were undertaken with the objective of transforming

regulated economic development to a competitive regime for accelerating economic growth. With positive indicators such as a stable 8-9% annual

growth, rising foreign exchange reserves, a booming capital market and rapidly expanding FDI inflows, India has emerged as the second fastest

growing major economy in the world.

The Indian economy has been growing at an average growth rate of 8.8% in the last four fiscal years (2003-04 to 2006-07), with the 2006-07 growth

rate of 9.6% being the highest in the last 18 years. Significantly, the industrial and service sectors have been contributing towards a major part of this

growth, suggesting the structural transformation underway in the Indian economy.

Industrial and services sectors have logged in a 10.63% and 11.18% growth rate in 2006-07 respectively, as against 8.02% and 11.01% in 2005-06.

Similarly, manufacturing grew by 8.98% and 12% in 2005-06 and 2006-07 and transport, storage and communication recorded a growth of 14.65%

and 16.64%, respectively.

Another significant feature of the growth process has been the consistently increasing savings and investment rate. While the gross saving rate as a

proportion of GDP has increased from 23.5% in 2001-02 to 34.8% in 2006-07, the investment rate-reflected as the gross capital formation as a

proportion of GDP-has increased from 22.8% in 2001-02 to 35.9% in 2006-07.

Financial reforms, coupled with improved infrastructure, are the key factors for this growth. After agriculture it is the industrial sector which is in a

transformation phase from being labour intensive to technology and efficiency enhancement intensive. India is set to reframe its economic structure

inducing technological advancements along with industrial friendly policies. These initiatives are expected to go a long way in promoting industrial

growth in the country.

! Overall industrial production grew by 9% in Q1 and Q2 2007, whereas capital goods production rose by 20.2% compared to 18.6% during same

period in 2006

! Manufacturing grew by 9.6% during Q1 and Q2 2007, on the back of 12.2% growth during same period in 2006-07

! Core infrastructure sector continued its growth rate recording 6% growth in Q1 and Q2 2007

! Exports grew by 21.76% during Q1 and Q2 2007, imports increased by 25.97% in the same period

! Central Statistical Organisation (CSO) expects the economy to grow by 8.7% in 2007-08

! Warehousing and packaging contributes, 26% of the logistics cost in India

! Average escalation in warehousing costs between 2001-2006, has been maximum for the steel industry followed by pharmaceutical and auto

industries

! India spends 13-14% of its GDP on logistics cost, whereas this figure is 7-8% for developed countries

Industrial Park/Industrial Estate

“Industrial Park” means a project in which plots of developed space or built up space or a combination with common facilities and quality infrastructure

facilities, is developed and made available for the purposes of industrial or commercial activities. Any undertaking which develops, develops and

operates or maintains and operates an industrial park may make an application for notification under clause (iii) of sub-section (4) of section 80-IA of the

Act.

The Central Board of Direct Taxes shall process the application for approval and notification by the Central Government and for this purpose it may call

for reports from other departments or agencies, as it may deem fit.

Fact file

An industrial park is divided according to the following activities

• Industrial activity

• Common facility

• Commercial activity

• Infrastructural facility

Industrial Park Scheme, 2008

Criteria for approval

The scheme extends 100% tax holiday on profits derived by an undertaking from the activity of developing, developing

and operating, or maintaining and operating an Industrial Park and is applicable to all Industrial Parks set up between

April 1, 2006 and March 31, 2009.

(1) The date of commencement of the Industrial Park should be on or after the 1st day of April 2006 and not later than

31st of March 2009

(2) The area allocated or to be allocated to industrial units shall not be less than 90% of the allocable area

(3) There shall be a minimum of thirty industrial units located in an industrial park

(4) For the purpose of computing the minimum number of industrial units; all units of a person and his associated

enterprises will be treated as a single unit

(5) The minimum constructed floor area shall not be less than 50,000 sq.mt.

(6) No industrial unit, along with the units of an associated enterprise, shall occupy more than 25% of the allocable area

(7) The industrial park should be owned by only one undertaking

(8) Industrial units shall undertake only manufacturing activity as defined in section D of the National Classification, 2004,

Code issued by the Central Statistical Organisation, Department of Statistics

04 05

Type of industrial park Minimum Number of units to be provided inthe Industrial Model Town/Industrial

Park/Growth Centre

(i) Industrial Model Town 50 units

(ii) Industrial Park 30 units

(iii) Growth Centre 30 units

Table 1: Classification of Industrial Parks

www.knightfrank.com


Special Economic Zones (SEZs)

As defined in EXIM Policy 2000, Special Economic Zones (SEZs) in India are defined as:

“A specifically delineated duty-free enclave which shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs”

SEZs in India have evolved from the erstwhile Export Promotion Zones (EPZ) which were introduced in 1965. The first EPZ was set up at Kandla,

Gujarat, followed by another one at Santacruz, Mumbai in 1973. The present shape of SEZs began taking place in the early 1990's, when wide ranging

measures were initiated by the government for revamping and restructuring EPZs. This was continued in the Exim Policy (1997-2002), which formally

introduced the term SEZ, followed by the announcement of SEZ Act of 2005, which supported by the SEZ rules came into effect in 2006.

Given below is a flowchart which highlights the processes involved for the setting up of an SEZ:

Application submitted to Chief Secretary of State with details on

· Status report of applicant, nature of SEZ

· Location details of proposed SEZ, infrastructure plan

· Financial details, investment plan (min. outlay Rs.1 billion)

Process flowchart for setting up a Special Economic Zone (SEZ)

• Environment clearances

• Commitment on exemption of taxes on power, sales tax, duty and cess from DTA products

• Proposal forwarded to Deptt of Commerce, Govt. of India

• Review of proposal by inter-ministerial committee

• Permission

• Approval committee issues LOA (valid for 1 year)

• Entitlement to unit approved in processing zone/FTWZ

Logistics and Warehousing

Overview of India's container freight segment

Logistics is the management of the flow of goods, information and other resources, including energy and people, between the point of origin and the

point of consumption in order to meet the requirements of consumers (frequently, and originally, military organisations). Logistics involve the

integration of information, transportation, inventory, warehousing and material-handling. Warehouse on the other hand is defined as a commercial

building for storage of goods predominantly used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. They come

equipped with loading docks to load and unload trucks or sometimes are loaded directly from railways, airports or seaports. They use cranes and

forklifts for moving goods, which are usually placed on standard pallets.

The logistics and warehousing business is considered to be the backbone of industrial development. The Indian logistics business is valued at Rs.596.82

billion and has been growing at a CAGR of 7-8%. As mentioned earlier, the logistics cost represents 13-14% of the country's GDP. The market is

fragmented with thousands of players offering partial services in logistics; it is estimated that there are about 400 firms capable of providing some level

of integrated service. The economy is expected to grow around 10% over the next ten years and sectors like chemicals, petrochemicals,

pharmaceuticals, metals and metal processing, FMCG, textile, retail and automobile are projected to grow the fastest. New business models are

emerging with the advent of new firms, both domestic and foreign, into the market. As a result of the ensuing competition, linkages with global supply

chains and domestic market growth promise to bring over a sea change in to the logistics industry.

Containerised cargo represents about 30% by value and 55% by volume of India's external trade and this proportion is growing rapidly. Globally,

75-80% of trade by volume happens through containers. India's container cargo traffic is estimated to reach 21 million Twenty feet Equivalent Units

(TEUs), a year by 2016. The estimated growth rate for the same stands at around 18-19%.

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amEn

nore

henn

ai

C Tico

i

utr n

Cochi

n

New

M

galo

re

an

Mar

mag

oaM

umba

iJ

TNP

K

lan

da

April-Dec 2006 April-Dec 2007

Source: Government of West Bengal (Annual Report 2006-07)

www.knightfrank.com



As defined in EXIM Policy 2000, Special Economic Zones (SEZs) in India are defined as:

“A specifically delineated duty-free enclave which shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs”

SEZs in India have evolved from the erstwhile Export Promotion Zones (EPZ) which were introduced in 1965. The first EPZ was set up at Kandla,

Gujarat, followed by another one at Santacruz, Mumbai in 1973. The present shape of SEZs began taking place in the early 1990's, when wide ranging

measures were initiated by the government for revamping and restructuring EPZs. This was continued in the Exim Policy (1997-2002), which formally

introduced the term SEZ, followed by the announcement of SEZ Act of 2005, which supported by the SEZ rules came into effect in 2006.

Given below is a flowchart which highlights the processes involved for the setting up of an SEZ:

Application submitted to Chief Secretary of State with details on

· Status report of applicant, nature of SEZ

· Location details of proposed SEZ, infrastructure plan

· Financial details, investment plan (min. outlay Rs.1 billion)

Process flowchart for setting up a Special Economic Zone (SEZ)

• Environment clearances

• Commitment on exemption of taxes on power, sales tax, duty and cess from DTA products

• Proposal forwarded to Deptt of Commerce, Govt. of India

• Review of proposal by inter-ministerial committee

• Permission

• Approval committee issues LOA (valid for 1 year)

• Entitlement to unit approved in processing zone/FTWZ


Overview of India's container freight segment

Logistics is the management of the flow of goods, information and other resources, including energy and people, between the point of origin and the

point of consumption in order to meet the requirements of consumers (frequently, and originally, military organisations). Logistics involve the

integration of information, transportation, inventory, warehousing and material-handling. Warehouse on the other hand is defined as a commercial

building for storage of goods predominantly used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. They come

equipped with loading docks to load and unload trucks or sometimes are loaded directly from railways, airports or seaports. They use cranes and

forklifts for moving goods, which are usually placed on standard pallets.

The logistics and warehousing business is considered to be the backbone of industrial development. The Indian logistics business is valued at Rs.596.82

billion and has been growing at a CAGR of 7-8%. As mentioned earlier, the logistics cost represents 13-14% of the country's GDP. The market is

fragmented with thousands of players offering partial services in logistics; it is estimated that there are about 400 firms capable of providing some level

of integrated service. The economy is expected to grow around 10% over the next ten years and sectors like chemicals, petrochemicals,

pharmaceuticals, metals and metal processing, FMCG, textile, retail and automobile are projected to grow the fastest. New business models are

emerging with the advent of new firms, both domestic and foreign, into the market. As a result of the ensuing competition, linkages with global supply

chains and domestic market growth promise to bring over a sea change in to the logistics industry.

Containerised cargo represents about 30% by value and 55% by volume of India's external trade and this proportion is growing rapidly. Globally,

75-80% of trade by volume happens through containers. India's container cargo traffic is estimated to reach 21 million Twenty feet Equivalent Units

(TEUs), a year by 2016. The estimated growth rate for the same stands at around 18-19%.

Traffic handled at major ports in India

60000

50000

40000

30000

20000

10000

0

To

tal C

arg

o (

’000 t

on

nes)

Koka

al

t

Haldi

a o

kco

mpl

ex

dc

arad

ip

P

a

t

Vish

khap

ana

mEn

nreo

enna

Ch

i i

Tutic

orn

Cch

in

oN

wM

galo

e

e

an

rM

arm

aoga

Mum

aib

JNPT

Kand

la

April-Dec 2006 April-Dec 2007

Source: Government of West Bengal (Annual Report 2006-07)

www.knightfrank.com


Container Traffic volumes have been on the decline for a couple of years but it has now started to move towards its original rate of growth, as witnessed

from the graph below:

Container Traffic Growth in India

The reason for the decline in the container traffic movement in the last 2 years can be attributed to the fact that about 56% of the port development

projects announced had not been initiated on time but with development works currently underway port traffic volumes have gone up considerably.

With the increase in movement of container traffic in India and the existing gap between demand and supply for logistics service providers, a large

number of smaller firms have started to aim for a bigger profile. Over the last few years, a large number of PE funds have, invested into many of these

companies. Also companies like VRL Logistics, DRS and Premier Logistics are planning initial public offers.

However, recently a capacity crunch has been hampering external trade, in terms of handling cargo, raising transaction costs and delaying the time

taken for exports and imports. Approximately 95% of the country's external trade by volume, and 70% by value, moves by sea. Notably, the country's

biggest port, Jawaharlal Nehru Port (JNPT), located at Navi Mumbai, accounts for more than 60% of India's container cargo traffic of about 7.5 million

TEUs. The situation here has reached a critical stage in terms of demand surpassing the space required. Similarly, each of the three terminals at JNPT is

operating at 110-120% of their capacity.

! According to the World Bank, it costs Rs. 49,196.12 for importing a cargo container into India and Rs.35,137.62 for exporting one from India

! It takes Rs.15,726.23 for importing a container into Singapore while it costs Rs. 16,711.56 for exporting a container from China

! It takes 21 days each for importing or exporting a container into or out of India

! It takes 3 days to import a container into Singapore and just 5 to export one from Denmark

Fact file

08 09

Industrial Sector

Overview of the Zones

North Zone

• Delhi

• Haryana

• Uttar Pradesh (UP)

In order to facilitate our study and to aid the reader's understanding, we have divided the country into four zones, namely North zone, South zone,

East zone and West zone. The states which have been short listed for each zone has been done with regard to their industrial presence and potential for

development. After analysing the data received from the respective state industrial development corporations regarding current industrial activity and

the proposed developments/new estates, and also taking into account other favourable factors like good connectivity, proximity to the

consumer market, ease of transportation of the raw materials and good infrastructure, locations with high and medium potential for industrial

development have been concluded for each of the said zones.

The states which have been selected from this region are Delhi, Haryana, Uttar Pradesh and Rajasthan. Being the most prosperous economy in the

country, Delhi has benefited significantly from the rapid economic growth in India during the past decade. Its superior infrastructure and proximity to

the central government is a major attraction for foreign and domestic investors to locate themselves in the city. Its status as a city-state provides ample

business and investment opportunities, particularly in the services sector. The industrial sector in the region is currently growing at 5.7% per annum.

Delhi has developed 28 industrial estates through the Delhi State Industrial Development Corporation (DSIDC) and the Industries Department. Besides,

the Delhi government is building an IT park with an initial investment of Rs.692.66 million. It proposes to set up a World Trade Centre to promote

international trade and commerce at the same park. DSIDC plans to develop industry specific industrial estates for apparels, gems and jewellery. The

proposed gem and jewellery park will be spread over 2 acres and will be set up at Okhla. It will be developed through private sector participation. The

government has acquired 2,100 acres of land to develop new industrial estates in Bawana and Holambi Kalan. The new industrial estate at Bawana has

been almost fully developed with the provision of necessary infrastructure. 18,360 plots/flats have been allotted to the industrial units. Further, around

175 hectares of land at Bhorgad has been acquired for development of a new industrial area.

thWith a Net Domestic Product of over Rs.299.25 billion, Haryana's economy is the 13 largest in the country. Geographically one of the smallest states in

India, covering an area of 1.37%, it enjoys a locational advantage being situated in the National Capital Region (NCR), a prominent trade and

commerce centre. In recent years, the areas of Haryana surrounding Delhi have seen a surge in economic activity with Gurgaon emerging as the

principal suburban township of Delhi. Haryana has developed 103 industrial estates through its development agencies. The industrial estates in the state

are being developed by Haryana State Industrial Development Corporation (HSIDC), Haryana Urban Development Authority (HUDA) and private

developers. To facilitate coordinated development of infrastructure and participation of private sector including FDI, the HSIDC is designated to be the

nodal agency for infrastructure development and it is proposed to redesignate it as 'Haryana State Industrial and Infrastructure Development

Corporation' (HSIIDC).

Uttar Pradesh has 129 industrial areas and ranks third in the number of industrial parks at 89, extending over a total area of 38,000 acres. The state has

developed integrated industrial areas of Noida and Greater Noida in proximity to New Delhi with state-of-the-art industrial and domestic infrastructure.

UP has an Export Promotion Zone at Noida and two others at Moradabad and Kanpur are under implementation. The state has a well-developed

agro-based industry and has four Agro Export Zones fostering better exports of agricultural products. Being the largest producer of sugar cane, UP is

considered to be India's sugar bowl, accounting for 28.03% of the country's total sugar production. Agricultural affluence in the region has led to the

growth of allied industries like cold storages and warehousing. In addition to industrial areas, many centres like Kanpur, Ghaziabad and Lucknow have

their own established traditional industries. The presence of large livestock population has led the leather industry to flourish in the state. Kanpur and

Agra has emerged as the hubs for leather goods in the country. Textile industry is another promising sector in the state. Besides, UP is also the largest

producer of electronic goods and the fourth largest exporter of software products in the country. Notably, UP accounted for nearly 10% of IT and BPO

exports from the country in 2003-04. With a productive and cost effective manpower, the state has attracted some of the largest MNCs to set-up their

manufacturing facilities, companies like Coca-Cola, Pepsi, Glaxo, Daewoo, Honda and Piaggio to name a few. The state with its human resource

potential, proactive policies and commitment to ensure encouraging climate to the investors is poised to emerge as a manufacturing hub in the

country. The state has become a hub for corporate R&D with many domestic players and MNCs establishing their facilities.

20%

18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

2003-04 2005-06 2006-07

Perc

en

tag

e (

%)

Container Traffic Growth

Source: News Publications

www.knightfrank.com


Container Traffic volumes have been on the decline for a couple of years but it has now started to move towards its original rate of growth, as witnessed

from the graph below:

Container Traffic Growth in India

The reason for the decline in the container traffic movement in the last 2 years can be attributed to the fact that about 56% of the port development

projects announced had not been initiated on time but with development works currently underway port traffic volumes have gone up considerably.

With the increase in movement of container traffic in India and the existing gap between demand and supply for logistics service providers, a large

number of smaller firms have started to aim for a bigger profile. Over the last few years, a large number of PE funds have, invested into many of these

companies. Also companies like VRL Logistics, DRS and Premier Logistics are planning initial public offers.

However, recently a capacity crunch has been hampering external trade, in terms of handling cargo, raising transaction costs and delaying the time

taken for exports and imports. Approximately 95% of the country's external trade by volume, and 70% by value, moves by sea. Notably, the country's

biggest port, Jawaharlal Nehru Port (JNPT), located at Navi Mumbai, accounts for more than 60% of India's container cargo traffic of about 7.5 million

TEUs. The situation here has reached a critical stage in terms of demand surpassing the space required. Similarly, each of the three terminals at JNPT is

operating at 110-120% of their capacity.

! According to the World Bank, it costs Rs. 49,196.12 for importing a cargo container into India and Rs.35,137.62 for exporting one from India

! It takes Rs.15,726.23 for importing a container into Singapore while it costs Rs. 16,711.56 for exporting a container from China

! It takes 21 days each for importing or exporting a container into or out of India

! It takes 3 days to import a container into Singapore and just 5 to export one from Denmark

Fact file

08 09

Industrial Sector

Overview of the Zones

North Zone

• Delhi

• Haryana

• Uttar Pradesh (UP)

In order to facilitate our study and to aid the reader's understanding, we have divided the country into four zones, namely North zone, South zone,

East zone and West zone. The states which have been short listed for each zone has been done with regard to their industrial presence and potential for

development. After analysing the data received from the respective state industrial development corporations regarding current industrial activity and

the proposed developments/new estates, and also taking into account other favourable factors like good connectivity, proximity to the

consumer market, ease of transportation of the raw materials and good infrastructure, locations with high and medium potential for industrial

development have been concluded for each of the said zones.

The states which have been selected from this region are Delhi, Haryana, Uttar Pradesh and Rajasthan. Being the most prosperous economy in the

country, Delhi has benefited significantly from the rapid economic growth in India during the past decade. Its superior infrastructure and proximity to

the central government is a major attraction for foreign and domestic investors to locate themselves in the city. Its status as a city-state provides ample

business and investment opportunities, particularly in the services sector. The industrial sector in the region is currently growing at 5.7% per annum.

Delhi has developed 28 industrial estates through the Delhi State Industrial Development Corporation (DSIDC) and the Industries Department. Besides,

the Delhi government is building an IT park with an initial investment of Rs.692.66 million. It proposes to set up a World Trade Centre to promote

international trade and commerce at the same park. DSIDC plans to develop industry specific industrial estates for apparels, gems and jewellery. The

proposed gem and jewellery park will be spread over 2 acres and will be set up at Okhla. It will be developed through private sector participation. The

government has acquired 2,100 acres of land to develop new industrial estates in Bawana and Holambi Kalan. The new industrial estate at Bawana has

been almost fully developed with the provision of necessary infrastructure. 18,360 plots/flats have been allotted to the industrial units. Further, around

175 hectares of land at Bhorgad has been acquired for development of a new industrial area.

thWith a Net Domestic Product of over Rs.299.25 billion, Haryana's economy is the 13 largest in the country. Geographically one of the smallest states in

India, covering an area of 1.37%, it enjoys a locational advantage being situated in the National Capital Region (NCR), a prominent trade and

commerce centre. In recent years, the areas of Haryana surrounding Delhi have seen a surge in economic activity with Gurgaon emerging as the

principal suburban township of Delhi. Haryana has developed 103 industrial estates through its development agencies. The industrial estates in the state

are being developed by Haryana State Industrial Development Corporation (HSIDC), Haryana Urban Development Authority (HUDA) and private

developers. To facilitate coordinated development of infrastructure and participation of private sector including FDI, the HSIDC is designated to be the

nodal agency for infrastructure development and it is proposed to redesignate it as 'Haryana State Industrial and Infrastructure Development

Corporation' (HSIIDC).

Uttar Pradesh has 129 industrial areas and ranks third in the number of industrial parks at 89, extending over a total area of 38,000 acres. The state has

developed integrated industrial areas of Noida and Greater Noida in proximity to New Delhi with state-of-the-art industrial and domestic infrastructure.

UP has an Export Promotion Zone at Noida and two others at Moradabad and Kanpur are under implementation. The state has a well-developed

agro-based industry and has four Agro Export Zones fostering better exports of agricultural products. Being the largest producer of sugar cane, UP is

considered to be India's sugar bowl, accounting for 28.03% of the country's total sugar production. Agricultural affluence in the region has led to the

growth of allied industries like cold storages and warehousing. In addition to industrial areas, many centres like Kanpur, Ghaziabad and Lucknow have

their own established traditional industries. The presence of large livestock population has led the leather industry to flourish in the state. Kanpur and

Agra has emerged as the hubs for leather goods in the country. Textile industry is another promising sector in the state. Besides, UP is also the largest

producer of electronic goods and the fourth largest exporter of software products in the country. Notably, UP accounted for nearly 10% of IT and BPO

exports from the country in 2003-04. With a productive and cost effective manpower, the state has attracted some of the largest MNCs to set-up their

manufacturing facilities, companies like Coca-Cola, Pepsi, Glaxo, Daewoo, Honda and Piaggio to name a few. The state with its human resource

potential, proactive policies and commitment to ensure encouraging climate to the investors is poised to emerge as a manufacturing hub in the

country. The state has become a hub for corporate R&D with many domestic players and MNCs establishing their facilities.

20%

18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

2003-04 2005-06 2006-07

Perc

en

tag

e (

%)

Container Traffic Growth

Source: News Publications

www.knightfrank.com


• Rajasthan

The key industries in Rajasthan include mineral based industries, textile, tourism and gems and jewellery. Rajasthan enjoys a distinct advantage in these

sectors. It is also the leading producer of cement and metals such as copper, zinc and lead and the largest producer of marble and stones in the

country. Recent discovery of oil and gas in Rajasthan is expected to lead to the development of downstream industries in petroleum and chemicals.

Reforms in the electricity sector in the state are one of the most advanced in the country. Rajasthan is the first state in the country to permit “open

access” in its electricity supply market. While the industrial sector has grown at 6.9% per annum, the growth rate of services was 7.4% during the same

period. Among services, the share of trade and tourism in state's GSDP stands at over 16%. Rajasthan has a network of almost 300 industrial estates

developed by RIICO. These are spread across the state, with many of them focused exclusively on high growth industries such as gems and jewellery,

apparels, agro-processing and biotechnology. These estates provide good infrastructure support to units locating there, including uninterrupted

electricity and water supply, sewerage and common roads.

East Zone

West Bengal is the only state which has been selected from the East zone. The state has the third largest economy in India. Its areas of strength include

petrochemicals, steel, food processing and leather industry. With around 8% of India's population residing here, the state is one of the largest consumer

markets in the country. West Bengal is also one of the few states which have a surplus electricity generation capacity. The state is the largest producer of

vegetables and fruits in the country and offers significant opportunities in the food processing industry. Availability of abundant mineral resources and

proximity to ports gives it a competitive advantage particularly in sectors such as steel.

The West Bengal Industrial Development Co-operation (WBIDC) has developed over 30 industrial estates in various parts of the state. These include

estates in and around Kolkata, Haldia, Duragpur and Asansol. These estates focus on IT/ITES, petrochemicals, chemical based industries and steel based

industries. A total of 1,300 hectares of industrial land is currently available with WBIDC across the state for the establishment of new industrial units.

10 11

• Karnataka

Karnataka is one of the most developed states in south India and is the pioneer in driving the industrial growth in the country. Over the years, the state

has been promoted as the preferred destination for domestic and foreign investment to catalyse industrial growth. For a long time Karnataka has been

consistently pursuing progressive industrial policies to meet the changing needs of the state's economy and industry. During the last century, the state

has had the distinction of building a strong and vibrant industrial base, which combines the intrinsic strengths of large industrial public sector

undertakings, large and medium privately owned industries and a wide and dispersed small-scale sector. Karnataka has demonstrated its strength over a

wide spectrum of sectors in industry and has had outstanding examples of success. In recent times, it has emerged as the knowledge and technology

capital of the country making rapid strides in economical growth. IT and related industries, biotechnology and research and development institutions

have given Karnataka a pride of place in the global market, thereby leading to considerable foreign direct investment both in Bengaluru and in other

parts of the State.

Karnataka, being one among the top five Industrialised states in the country, the state policy aims to achieve a consistent economic growth rate of

8-9% over the next decade. Policy makers propose to create employment opportunities through industrial growth in the state and several sectors have

been identified as thrust areas. The state offers a range of incentives including tax exemptions for investment in these sectors. These sectors are

electronics, telecommunication, informatics, precision tooling and tool room industries, readymade garments including leather garments

(excluding leather tanning), units manufacturing pollution control and effluent treatment plants, equipment and appliances and biotechnology. The

state government plans to establish a corpus called the 'Technology Upgradation Fund' of Rs.448.14 million to encourage technology upgradation in

industries.

• Tamil Nadu

• Andhra Pradesh

Tamil Nadu is one of the most industrialised states in India as well as the third largest economy in the country. The State Domestic Product stands at

Rs.1168.06 billion and the current economic growth rate is 6.1%. The exports have been recorded at Rs.275.28 billion of 9% in the past decade. The

state also has a share of 9.1% Market Potential Value in the country, which reflects a high purchasing power and capacity of the market to absorb new

products and services. In recent times, there has been a significant increase in the proportion of population in the middle-income group.

Tamil Nadu also has a well developed manufacturing sector with high value addition in the factories, and accounts for 16% of the total number of

factories in the country. The growth in manufacturing and services sectors has led to the rise in the standard of living of the people in the state and in

turn, has benefited from it.

As with the other southern states, Andhra Pradesh has also witnessed high growth within the industrial space. The Andhra Pradesh Industrial policy

2005-10 is aimed at promoting industrialisation in the state. Incentives are being offered to attract investments in this sector. Andhra Pradesh with

272 industrial estates has the second highest number of industrial estates in the country.

South Zone

The states selected from the South Zone are Karnataka, Tamil Nadu and Andhra Pradesh.

Table 2: Growth potential for industrial region: North zone

Locations District/City/State Growth Potential

Jamalpur Gurgaon High

Bartal Uttar Pradesh Medium

Kanakpura Jaipur Medium

Palwal Faridabad High

Kanpur Uttar Pradesh High

Ladhowal Uttar Pradesh High

Mandi Govindgarh Ludhiana High

Dhandhari Kalan Ludhiana High

Bawal Gurgaon Medium

Dadri Greater Noida Medium

Source: Knight Frank Research

Table 3: Growth potential for industrial region: East zone


Jalpaiguri West Bengal High

Coochbehar West Bengal Medium

Maldah West Bengal Medium

South 24 Parganas West Bengal High

Howrah West Bengal High

Nadia West Bengal Medium

Medinipur West Bengal High


Table 4: Growth potential for industrial region: South zone

Location District/City/State Growth Potential

Madhavaram Tamil Nadu High

Sriperumbudur Tamil Nadu High

Hosur Karnataka High

Peenya Karnataka Medium

Hoskote Karnataka High

Medchal Andhra Pradesh Medium

Malkapur Andhra Pradesh High

Vishakapatnam Andhra Pradesh High

Vijaywada Andhra Pradesh High

Belgaum Karnataka High

Mangalore Karnataka Medium

Mysore Karnataka Medium

Madurai Tamil Nadu High

Coimbatore Tamil Nadu Medium

Salem Tamil Nadu Medium


www.knightfrank.com


• Rajasthan

The key industries in Rajasthan include mineral based industries, textile, tourism and gems and jewellery. Rajasthan enjoys a distinct advantage in these

sectors. It is also the leading producer of cement and metals such as copper, zinc and lead and the largest producer of marble and stones in the

country. Recent discovery of oil and gas in Rajasthan is expected to lead to the development of downstream industries in petroleum and chemicals.

Reforms in the electricity sector in the state are one of the most advanced in the country. Rajasthan is the first state in the country to permit “open

access” in its electricity supply market. While the industrial sector has grown at 6.9% per annum, the growth rate of services was 7.4% during the same

period. Among services, the share of trade and tourism in state's GSDP stands at over 16%. Rajasthan has a network of almost 300 industrial estates

developed by RIICO. These are spread across the state, with many of them focused exclusively on high growth industries such as gems and jewellery,

apparels, agro-processing and biotechnology. These estates provide good infrastructure support to units locating there, including uninterrupted

electricity and water supply, sewerage and common roads.

East Zone

West Bengal is the only state which has been selected from the East zone. The state has the third largest economy in India. Its areas of strength include

petrochemicals, steel, food processing and leather industry. With around 8% of India's population residing here, the state is one of the largest consumer

markets in the country. West Bengal is also one of the few states which have a surplus electricity generation capacity. The state is the largest producer of

vegetables and fruits in the country and offers significant opportunities in the food processing industry. Availability of abundant mineral resources and

proximity to ports gives it a competitive advantage particularly in sectors such as steel.

The West Bengal Industrial Development Co-operation (WBIDC) has developed over 30 industrial estates in various parts of the state. These include

estates in and around Kolkata, Haldia, Duragpur and Asansol. These estates focus on IT/ITES, petrochemicals, chemical based industries and steel based

industries. A total of 1,300 hectares of industrial land is currently available with WBIDC across the state for the establishment of new industrial units.

10 11

• Karnataka

Karnataka is one of the most developed states in south India and is the pioneer in driving the industrial growth in the country. Over the years, the state

has been promoted as the preferred destination for domestic and foreign investment to catalyse industrial growth. For a long time Karnataka has been

consistently pursuing progressive industrial policies to meet the changing needs of the state's economy and industry. During the last century, the state

has had the distinction of building a strong and vibrant industrial base, which combines the intrinsic strengths of large industrial public sector

undertakings, large and medium privately owned industries and a wide and dispersed small-scale sector. Karnataka has demonstrated its strength over a

wide spectrum of sectors in industry and has had outstanding examples of success. In recent times, it has emerged as the knowledge and technology

capital of the country making rapid strides in economical growth. IT and related industries, biotechnology and research and development institutions

have given Karnataka a pride of place in the global market, thereby leading to considerable foreign direct investment both in Bengaluru and in other

parts of the State.

Karnataka, being one among the top five Industrialised states in the country, the state policy aims to achieve a consistent economic growth rate of

8-9% over the next decade. Policy makers propose to create employment opportunities through industrial growth in the state and several sectors have

been identified as thrust areas. The state offers a range of incentives including tax exemptions for investment in these sectors. These sectors are

electronics, telecommunication, informatics, precision tooling and tool room industries, readymade garments including leather garments

(excluding leather tanning), units manufacturing pollution control and effluent treatment plants, equipment and appliances and biotechnology. The

state government plans to establish a corpus called the 'Technology Upgradation Fund' of Rs.448.14 million to encourage technology upgradation in

industries.

• Tamil Nadu

• Andhra Pradesh

Tamil Nadu is one of the most industrialised states in India as well as the third largest economy in the country. The State Domestic Product stands at

Rs.1168.06 billion and the current economic growth rate is 6.1%. The exports have been recorded at Rs.275.28 billion of 9% in the past decade. The

state also has a share of 9.1% Market Potential Value in the country, which reflects a high purchasing power and capacity of the market to absorb new

products and services. In recent times, there has been a significant increase in the proportion of population in the middle-income group.

Tamil Nadu also has a well developed manufacturing sector with high value addition in the factories, and accounts for 16% of the total number of

factories in the country. The growth in manufacturing and services sectors has led to the rise in the standard of living of the people in the state and in

turn, has benefited from it.

As with the other southern states, Andhra Pradesh has also witnessed high growth within the industrial space. The Andhra Pradesh Industrial policy

2005-10 is aimed at promoting industrialisation in the state. Incentives are being offered to attract investments in this sector. Andhra Pradesh with

272 industrial estates has the second highest number of industrial estates in the country.

South Zone

The states selected from the South Zone are Karnataka, Tamil Nadu and Andhra Pradesh.

Table 2: Growth potential for industrial region: North zone


Jamalpur Gurgaon High

Bartal Uttar Pradesh Medium

Kanakpura Jaipur Medium

Palwal Faridabad High

Kanpur Uttar Pradesh High

Ladhowal Uttar Pradesh High

Mandi Govindgarh Ludhiana High

Dhandhari Kalan Ludhiana High

Bawal Gurgaon Medium

Dadri Greater Noida Medium


Table 3: Growth potential for industrial region: East zone


Jalpaiguri West Bengal High

Coochbehar West Bengal Medium

Maldah West Bengal Medium

South 24 Parganas West Bengal High

Howrah West Bengal High

Nadia West Bengal Medium

Medinipur West Bengal High


Table 4: Growth potential for industrial region: South zone


Madhavaram Tamil Nadu High

Sriperumbudur Tamil Nadu High

Hosur Karnataka High

Peenya Karnataka Medium

Hoskote Karnataka High

Medchal Andhra Pradesh Medium

Malkapur Andhra Pradesh High

Vishakapatnam Andhra Pradesh High

Vijaywada Andhra Pradesh High

Belgaum Karnataka High

Mangalore Karnataka Medium

Mysore Karnataka Medium

Madurai Tamil Nadu High

Coimbatore Tamil Nadu Medium

Salem Tamil Nadu Medium


www.knightfrank.com


Further, it ranks third in worker population and fourth in total number of factories. The state has four growth centres in Bobbili, Jedcherla, Hindupur and

Ongole, and two SEZs in Kakkinada and Vishakapatanam, thereby facilitating a good environment for exports and investments. Development of quality

infrastructure through private participation has been given the highest priority. In line with this objective, the government has constituted the

Infrastructure Authority (IA) for the rapid development of physical and social infrastructure in the state and to attract private sector participation in

designing, financing, construction, operations and maintenance of infrastructure projects. The industrial policy promises 100% stamp duty and transfer

duty reimbursements. Large industries are set to gain with the setting up of the Industrial Promotional Fund which would cater to specific problems on

a case to case basis.

The states which have been selected from the west zone are Gujarat and Maharashtra.

Maharashtra's economy is the largest among all states in the country. The state recorded a Net State Domestic Product (NSDP) of over

Rs.1506.12 billion in 2003-04. It is a leading industrial state accounting for 20% of the country's investment, 17% of Foreign Direct Investment, 20% of

its industrial output and 40% of its exports. Besides, Maharashtra is a leading producer of oil and gas, petrochemicals, pharmaceuticals and automobiles

in the country. The state's large urban population and growing services sector provide opportunities for investment in tourism, leisure and

entertainment industries. Biotechnology is another emerging sector in the region. Mumbai, the state's capital city, is recognised as the principal

commercial and financial centre of the country. The state boasts of well developed transportation and industrial infrastructure, which is among the best

in the country. The Export Oriented Units (EOUs) enjoy a competitive advantage owing to the presence of the country's largest airport and container

terminal in the state. Maharashtra has two principal ports located at Mumbai and Nhava Sheva, besides having 48 smaller ports along its 720 km

coastline as well. There are 19 industrial clusters/locations identified by the Government of India for infrastructure improvement under the Industrial

Infrastructure Upgradation Scheme (IIUS). IIUS would help the cluster in enhancing its competitiveness by providing quality infrastructure through

public-private partnership.

Gujarat, India's leading industrial state is a manufacturing powerhouse with world class production capabilities in textiles, petrochemicals,

pharmaceuticals and agro-based products. Situated on the western tip of India, Gujarat has the longest coastline in the country. The state has 41 ports

including India's only chemical handling port located at Dahej at Bharuch district. The state has extensive road, rail and air network. The recently

commissioned Liquefied Natural Gas (LNG) terminals in Dahej stand to augment its capabilities in the power sector and benefit the industry. The state

also has India's largest hydro project, Sardar Sarovar.

Industrial estates have proven to be a popular business model in the region with Jamnagar being the world's largest industrial estate and Kandla being

Asia's first and largest Multi-Product SEZ. The chemical industry in Gujarat accounts for half of the annual investment in the state and contributes to

about 20% of the chemical output in the country, while its gem and jewellery industry processes 80% of the diamonds in the country. The state also

enjoys a significant market presence in the processed food segment.

Gujarat has been keen to leverage its natural resource base and entrepreneurial spirit to maintain its leadership position. To attract investments the state

has set up single window operations at the district level. It is also actively seeking private participation to improve existing infrastructure facilities. In fact,

Gujarat was the first in the country to develop port facilities, estates and roads in conjunction with the private sector.

West Zone

• Maharashtra

• Gujarat

12 13

Industrial supply

Table 7: Prime industrial estates (for each state)

Sr. No Name of Industrial Estate Location Area (acres) Rental Values Occupancy(Rs./sq.m. per month)

Uttar Pradesh

1 Ghaziabad Ghaziabad 3,796 4,605 95%

2 Kanpur Kanpur 2,965 1,038.38 70%

3 Meerut Meerut 703 769 95%

Haryana

1 Panchkula Technology Park Panchkula 79 8,500 49%

2 Gurgaon Gurgaon 780 7,500 95%

3 Karnal Karnal 72.43 1,800 85%

Maharashtra

1 Ranjangaon Ranjangaon 2,313 1,200 99%

2 Sinnar Sinnar 299 500 100%

3 Butibori Butibori 3,750 200 69%

Tamil Nadu

1 Perundurai Perundurai 2,600 296 89%

2 Nilakottai Nilakottai 380 148 47%

3 Gangaikondan Gangaikondan 1,995 124 58%

Gujarat

1 Ankleshwar Ankleshwar 4,029 600 99%

2 Naroda Naroda 907 1,550 99%

3 Pandesara Pandesara 545 1,200 99%

Karnataka

1 Peenya Peenya 1,485 741 100%

2 Hoskote Hoskote 402 296 97%

3 Dharwad Dharwad 2,185 148 75%

Andhra Pradesh

1 Sanathnagar Sanathnagar 88 15,000 NA

2 Warangal Warangal 26 3,000 NA

3 Pedagantyada Pedagantyada 214 3,000 89%

Rajasthan

1 Tapukara Alwar 750 3,100 80%

2 Cyber Park, Jodhpur Jodhpur 6 2,800 Upcoming

3 Bhiwadi Alwar 2,000 2,200 NA

West Bengal

1 Dabgram Jalpaiguri 92 544 91%

2 Kharagpur Kharagpur 227 445 83%

3 Kalyani Phase –III Nadia 77 435 81%


Table 6: Land banks for industrial use

State Total land area of the Land area under Total available land inState (’000 acres) Industrial Estates (’000 acres) Industrial Estates (%)

Uttar Pradesh 59,535 41 7

Maharashtra 76,108 137 4

Gujarat 48,433 66 38

Tamil Nadu 32,124 22 11

Andhra Pradesh 67,971 33 NA

Karnataka 47,444 28 26

Haryana 10,873 9 8

Rajasthan 84,569 56 NA

West Bengal 21,992 1.7 1


Table 5: Growth potential for industrial region: West zone


Mumbai Maharashtra Medium

Pune Maharashtra High

Nashik Maharashtra High

Nagpur Maharashtra High

Vashi Maharashtra High

Ahmedabad Gujarat Medium

Vadodara Gujarat High

Kandla Gujarat Medium

Surat Gujarat High


www.knightfrank.com


Further, it ranks third in worker population and fourth in total number of factories. The state has four growth centres in Bobbili, Jedcherla, Hindupur and

Ongole, and two SEZs in Kakkinada and Vishakapatanam, thereby facilitating a good environment for exports and investments. Development of quality

infrastructure through private participation has been given the highest priority. In line with this objective, the government has constituted the

Infrastructure Authority (IA) for the rapid development of physical and social infrastructure in the state and to attract private sector participation in

designing, financing, construction, operations and maintenance of infrastructure projects. The industrial policy promises 100% stamp duty and transfer

duty reimbursements. Large industries are set to gain with the setting up of the Industrial Promotional Fund which would cater to specific problems on

a case to case basis.

The states which have been selected from the west zone are Gujarat and Maharashtra.

Maharashtra's economy is the largest among all states in the country. The state recorded a Net State Domestic Product (NSDP) of over

Rs.1506.12 billion in 2003-04. It is a leading industrial state accounting for 20% of the country's investment, 17% of Foreign Direct Investment, 20% of

its industrial output and 40% of its exports. Besides, Maharashtra is a leading producer of oil and gas, petrochemicals, pharmaceuticals and automobiles

in the country. The state's large urban population and growing services sector provide opportunities for investment in tourism, leisure and

entertainment industries. Biotechnology is another emerging sector in the region. Mumbai, the state's capital city, is recognised as the principal

commercial and financial centre of the country. The state boasts of well developed transportation and industrial infrastructure, which is among the best

in the country. The Export Oriented Units (EOUs) enjoy a competitive advantage owing to the presence of the country's largest airport and container

terminal in the state. Maharashtra has two principal ports located at Mumbai and Nhava Sheva, besides having 48 smaller ports along its 720 km

coastline as well. There are 19 industrial clusters/locations identified by the Government of India for infrastructure improvement under the Industrial

Infrastructure Upgradation Scheme (IIUS). IIUS would help the cluster in enhancing its competitiveness by providing quality infrastructure through

public-private partnership.

Gujarat, India's leading industrial state is a manufacturing powerhouse with world class production capabilities in textiles, petrochemicals,

pharmaceuticals and agro-based products. Situated on the western tip of India, Gujarat has the longest coastline in the country. The state has 41 ports

including India's only chemical handling port located at Dahej at Bharuch district. The state has extensive road, rail and air network. The recently

commissioned Liquefied Natural Gas (LNG) terminals in Dahej stand to augment its capabilities in the power sector and benefit the industry. The state

also has India's largest hydro project, Sardar Sarovar.

Industrial estates have proven to be a popular business model in the region with Jamnagar being the world's largest industrial estate and Kandla being

Asia's first and largest Multi-Product SEZ. The chemical industry in Gujarat accounts for half of the annual investment in the state and contributes to

about 20% of the chemical output in the country, while its gem and jewellery industry processes 80% of the diamonds in the country. The state also

enjoys a significant market presence in the processed food segment.

Gujarat has been keen to leverage its natural resource base and entrepreneurial spirit to maintain its leadership position. To attract investments the state

has set up single window operations at the district level. It is also actively seeking private participation to improve existing infrastructure facilities. In fact,

Gujarat was the first in the country to develop port facilities, estates and roads in conjunction with the private sector.

West Zone

• Maharashtra

• Gujarat

12 13

Industrial supply

Table 7: Prime industrial estates (for each state)

Sr. No Name of Industrial Estate Location Area (acres) Rental Values Occupancy(Rs./sq.m. per month)

Uttar Pradesh

1 Ghaziabad Ghaziabad 3,796 4,605 95%

2 Kanpur Kanpur 2,965 1,038.38 70%

3 Meerut Meerut 703 769 95%

Haryana

1 Panchkula Technology Park Panchkula 79 8,500 49%

2 Gurgaon Gurgaon 780 7,500 95%

3 Karnal Karnal 72.43 1,800 85%

Maharashtra

1 Ranjangaon Ranjangaon 2,313 1,200 99%

2 Sinnar Sinnar 299 500 100%

3 Butibori Butibori 3,750 200 69%

Tamil Nadu

1 Perundurai Perundurai 2,600 296 89%

2 Nilakottai Nilakottai 380 148 47%

3 Gangaikondan Gangaikondan 1,995 124 58%

Gujarat

1 Ankleshwar Ankleshwar 4,029 600 99%

2 Naroda Naroda 907 1,550 99%

3 Pandesara Pandesara 545 1,200 99%

Karnataka

1 Peenya Peenya 1,485 741 100%

2 Hoskote Hoskote 402 296 97%

3 Dharwad Dharwad 2,185 148 75%

Andhra Pradesh

1 Sanathnagar Sanathnagar 88 15,000 NA

2 Warangal Warangal 26 3,000 NA

3 Pedagantyada Pedagantyada 214 3,000 89%

Rajasthan

1 Tapukara Alwar 750 3,100 80%

2 Cyber Park, Jodhpur Jodhpur 6 2,800 Upcoming

3 Bhiwadi Alwar 2,000 2,200 NA

West Bengal

1 Dabgram Jalpaiguri 92 544 91%

2 Kharagpur Kharagpur 227 445 83%

3 Kalyani Phase –III Nadia 77 435 81%


Table 6: Land banks for industrial use

State Total land area of the Land area under Total available land inState (’000 acres) Industrial Estates (’000 acres) Industrial Estates (%)

Uttar Pradesh 59,535 41 7

Maharashtra 76,108 137 4

Gujarat 48,433 66 38

Tamil Nadu 32,124 22 11

Andhra Pradesh 67,971 33 NA

Karnataka 47,444 28 26

Haryana 10,873 9 8

Rajasthan 84,569 56 NA

West Bengal 21,992 1.7 1


Table 5: Growth potential for industrial region: West zone


Mumbai Maharashtra Medium

Pune Maharashtra High

Nashik Maharashtra High

Nagpur Maharashtra High

Vashi Maharashtra High

Ahmedabad Gujarat Medium

Vadodara Gujarat High

Kandla Gujarat Medium

Surat Gujarat High


www.knightfrank.com



SEZ Supply

The concept of SEZs was introduced in India in the year 2000 with an idea to attract foreign direct investments and removing regional gaps in

economic development. The policy was introduced to increase India's share of the world trade by facilitating trade friendly measures and improved

infrastructure. One of the main purposes has also been to promote manufacturing hubs within India so that marginal increase in exports and imports in

lesser developed areas of India could boost economic growth of the country.

The main objectives of SEZ act are:

! Generation of additional economic activity with creation of employment opportunities

! Promotion of exports of goods and services

! Promotion of investments from foreign and domestic sources

! Development of infrastructure facilities

As per Indian SEZ policy, any public/private/joint sector or state government or its agencies can set up a SEZ under Special Economic Zone Act

anywhere in India. Approved units under SEZ scheme can be the only operational units in a SEZ. In India, 100% FDI is allowed for all the manufacturing

activities in special economic zones except

! Arms and ammunitions, explosives and allied items of defence equipment, defence aircraft and warships

! Distillation and brewing of alcoholic drinks

! Automatic substances

! Narcotic and psychotropic substances and hazardous chemicals

! Cigarettes/cigars and manufacture tobacco substitutes

Since the introduction of the SEZ policy in 2005, more than 500 SEZs have been planned and 366 SEZs have already been formally approved. In terms

of area, the formally approved SEZs cover a total area of 490 sq.km. which forms just 0.016% of total land area of the country. By end of August, 2007,

a total of 142 SEZs had been notified, entailing an envisaged investment of Rs.467.05 billion and employment opportunity for approximately 40,153

people. 176 SEZ have been approved in principle covering 1,571 sq.km. (0.05% of the total land area). It is estimated that by 2008-09, with an

investment of Rs.2,833.19 billion, SEZs will create over 2,100,000 additional jobs and increase the exports by over Rs.100 billion.

14 15

Table 8: Distribution of SEZs across the various states of India

States Notified SEZs Formally Approved SEZs In-Principally Approved SEZs

Andhra Pradesh 54 72 3

Chandigarh 2 2 0

Chattisgarh 0 1 2

Dadar & Nagar Haveli 0 4 0

Delhi 0 2 0

Goa 3 7 0

Gujarat 18 39 9

Haryana 16 38 17

Himachal Pradesh 0 0 2

Jharkhand 1 1 0

Karnataka 20 41 10

Kerala 8 12 1

Madhya Pradesh 3 13 5

Maharashtra 24 88 37

Nagaland 0 2 0

Orissa 4 9 4

Pondicherry 0 1 0

Punjab 2 7 8

Rajasthan 4 8 9

Tamil Nadu 33 59 12

Uttar Pradesh 8 23 4

Uttarakhand 1 3 0

West Bengal 6 21 13

Total 207 453 136

Free Trade and Warehousing Zones (FTWZ)

Free trade and warehousing zone is a type of SEZ specific to the trade and warehousing segment. The objective of free trade warehousing zones is to

create trade-related infrastructure to facilitate the import and export of goods and services with freedom to carry out trade transactions in the free

currency. These zones would be established in areas close to seaports, airports or dry ports so as to offer easy access by rail and road. These zones will

fall under special category of SEZs with a focus on trade and warehousing. Given below is a flowchart which describes the procedure for setting up of

an FTWZ.

Distribution of land for notified SEZs

30%

30%4%

7%

18%

7%4%

AP Gujarat Haryana Karnataka Maharashtra Tamilnadu Others

Biotech Electronics Engineering IT/ITES Multiproduct & services Pharmaceuticals Textiles Food Processing Footwear

Others

Sector-wise classification of notified SEZs

14%

56%

5%

6% 2%1%

10% 1% 5%

0.1%

Process flowchart for setting up an FTWZ

Can be set up by public sector undertakings or public limited companies or by joint ventures in technical collaboration with experienced

infrastructure developers

Approval required from Board of Approval (BoA) in the Department of Commerce

Developer shall be issued a letter of permission for development, operation and maintenance.

The developer shall be permitted to sale/lease/rent out warehouses/workshops/office-space

and other facilities in the FTWZ to traders/exporters



Source: www.sezindia.nic.in

www.knightfrank.com



SEZ Supply

The concept of SEZs was introduced in India in the year 2000 with an idea to attract foreign direct investments and removing regional gaps in

economic development. The policy was introduced to increase India's share of the world trade by facilitating trade friendly measures and improved

infrastructure. One of the main purposes has also been to promote manufacturing hubs within India so that marginal increase in exports and imports in

lesser developed areas of India could boost economic growth of the country.

The main objectives of SEZ act are:

! Generation of additional economic activity with creation of employment opportunities

! Promotion of exports of goods and services

! Promotion of investments from foreign and domestic sources

! Development of infrastructure facilities

As per Indian SEZ policy, any public/private/joint sector or state government or its agencies can set up a SEZ under Special Economic Zone Act

anywhere in India. Approved units under SEZ scheme can be the only operational units in a SEZ. In India, 100% FDI is allowed for all the manufacturing

activities in special economic zones except

! Arms and ammunitions, explosives and allied items of defence equipment, defence aircraft and warships

! Distillation and brewing of alcoholic drinks

! Automatic substances

! Narcotic and psychotropic substances and hazardous chemicals

! Cigarettes/cigars and manufacture tobacco substitutes

Since the introduction of the SEZ policy in 2005, more than 500 SEZs have been planned and 366 SEZs have already been formally approved. In terms

of area, the formally approved SEZs cover a total area of 490 sq.km. which forms just 0.016% of total land area of the country. By end of August, 2007,

a total of 142 SEZs had been notified, entailing an envisaged investment of Rs.467.05 billion and employment opportunity for approximately 40,153

people. 176 SEZ have been approved in principle covering 1,571 sq.km. (0.05% of the total land area). It is estimated that by 2008-09, with an

investment of Rs.2,833.19 billion, SEZs will create over 2,100,000 additional jobs and increase the exports by over Rs.100 billion.

14 15

Table 8: Distribution of SEZs across the various states of India

States Notified SEZs Formally Approved SEZs In-Principally Approved SEZs

Andhra Pradesh 54 72 3

Chandigarh 2 2 0

Chattisgarh 0 1 2

Dadar & Nagar Haveli 0 4 0

Delhi 0 2 0

Goa 3 7 0

Gujarat 18 39 9

Haryana 16 38 17

Himachal Pradesh 0 0 2

Jharkhand 1 1 0

Karnataka 20 41 10

Kerala 8 12 1

Madhya Pradesh 3 13 5

Maharashtra 24 88 37

Nagaland 0 2 0

Orissa 4 9 4

Pondicherry 0 1 0

Punjab 2 7 8

Rajasthan 4 8 9

Tamil Nadu 33 59 12

Uttar Pradesh 8 23 4

Uttarakhand 1 3 0

West Bengal 6 21 13

Total 207 453 136

Free Trade and Warehousing Zones (FTWZ)

Free trade and warehousing zone is a type of SEZ specific to the trade and warehousing segment. The objective of free trade warehousing zones is to

create trade-related infrastructure to facilitate the import and export of goods and services with freedom to carry out trade transactions in the free

currency. These zones would be established in areas close to seaports, airports or dry ports so as to offer easy access by rail and road. These zones will

fall under special category of SEZs with a focus on trade and warehousing. Given below is a flowchart which describes the procedure for setting up of

an FTWZ.

Distribution of land for notified SEZs

30%

30%4%

7%

18%

7%4%

AP Gujarat Haryana Karnataka Maharashtra Tamilnadu Others

Biotech Electronics Engineering IT/ITES Multiproduct & services Pharmaceuticals Textiles Food Processing Footwear

Others

Sector-wise classification of notified SEZs

14%

56%

5%

6% 2%1%

10% 1% 5%

0.1%

Process flowchart for setting up an FTWZ

Can be set up by public sector undertakings or public limited companies or by joint ventures in technical collaboration with experienced

infrastructure developers

Approval required from Board of Approval (BoA) in the Department of Commerce

Developer shall be issued a letter of permission for development, operation and maintenance.

The developer shall be permitted to sale/lease/rent out warehouses/workshops/office-space

and other facilities in the FTWZ to traders/exporters



Source: www.sezindia.nic.in

www.knightfrank.com



Investment scenario in logistics sector

The logistics and warehousing sector, especially the much sought after 3PL services, have been witnessing sharp growth in last couple of years. Valued

at Rs.37.86 billion in 2005, the 3PL market in India is projected to grow at a CAGR of 21.9% from 2005 to 2012, reaching Rs.151.27 billion by the end

of 2012. Rapid growth in the Indian manufacturing sector is creating an increasing need for seamless logistics solutions. While the Indian 3PL market is

still very much in its infancy compared to those in other countries, it is experiencing healthy growth and attracting new companies eager to capitalise

on the plentiful opportunities it offers.

Currently, the trend of outsourcing the entire logistics function to a 3PL service provider is visible only in a few sectors in India. In the automotive sector,

for instance, end-to-end outsourcing is becoming increasingly popular as companies realise the benefits of focusing on core competencies and

delegating the logistics to 3PL service providers. Just-In-Time delivery (JIT) to the assembly line is another emerging concept that is gaining acceptance

in this sector. The penetration of 3PL services is particularly high in the automotive sector. Even companies that have traditionally adopted a

conservative business outlook have started outsourcing logistics to 3PL service providers. The IT hardware and electronics sectors are also witnessing a

rise in this trend, while those for fast moving consumer goods (FMCG) and pharmaceuticals have relatively low penetration rates.

As the Indian economy continues to grow at near double digit rates, the demand for logistics, as well as the sector itself, is rapidly increasing. India is

spending around Rs.4 trillion annually on logistics. The sector which has largely been under-owned and under-rated amongst all other sectors has

recently seen a large amount of interest from the Private Equity (PE) funds. The gestation period in the logistics sector is generally very high as

compared to other sectors. A large number of companies have been looking for opportunities to pick up stakes in the lesser known local logistics

players. From a long term perspective, the sector shall over the years, follow the path of consolidation, in terms of the number of players existing in the

market. The investments that have been made in the sector shall start giving returns only after a period of time however, the recent increase in petrol

and diesel prices has had an adverse impact on the stock market performance of the logistics companies.

Table 9: List of FTWZs in India

Sr. No Location Name of Developer Area (Ha) Approval Type

1 Village Srinagar and Ravirayal, FAB City SPV (India) Pvt. Ltd 120.06 Formal ApprovalMahewhwaram Mandal, Ranga Reddy

District, Andra Pradesh

2 Dighi Port, Raigad, Maharashtra Balaji Infra Projects Ltd (Port based) 100 Formal Approval

3 Mumbai Chiplun Infra Pvt. Ltd 40 Formal ApprovalFormerly M/s FTWZ Ltd.)

4 Mannur Village, Sriperembdur Taluka, J. Matadee Eco Parks Pvt. Ltd 40 NotifiedKancheepuram Dist, Tamil Nadu

5 Vallur Village, Ponneri Taluka, Tirvallur Jafza Chennai Business 136.8 Formal ApprovalDistrict, Tamil Nadu parks Pvt. Ltd

6 Greater Noida, Uttar Pradesh Free Trade Warehousing 80 In Principle ApprovalZone Pvt. Ltd

7 Kandla - Gujarat LMJ Warehousing Pvt. Ltd 40 In Principle Approval

8 Kochi FACT & Metals & Minerals 40 In Principle ApprovalTrading Corporation (MMTC)

9 Karnataka Shipco Infrastructure 120 In Principle ApprovalPvt. Ltd (SPIL)

10 Village SAI, Taluka Panvel, Maharashtra Arshiya Technologies 68 In Principle ApprovalInternational Ltd

11 Amritsar, Punjab M/s DLF Universal Ltd 40 In Principle Approval

12 Mangalore Suzlon Infrastructure Ltd. 486 In Principle Approval

Table 10: Investments in the logistics sector


Fund name Amount (Rs. mn) Target Firm

IDFC PE Fund II 1100 Sical Logistics

Kotak PE 1000 DRS Logistics

Clearstone Venture Advisors 160 Elbee Express

Tata Capital N.A Quickjet Cargo

Old Lane Opportunities Funds 1070 Sical Logistics

Blackstone 2420 Allcargo movers

Temasek Holdings 1000 First flight couriers ltd

Bennett Coleman & Company Limited N.A Airex Logistics

Realterm FCH Logistics Advisors Pvt. Ltd * -

Sidbi Venture Capital 88 Direct Logistics

Reliance Capital 500 BLR India

Erdene Capital PLC 854 MJ Logistics

New Vemon 532 Allcargo movers

IDFC PE 400 Delhi Assam roadways

* The fund will be set up through a 50:50 joint venture between Future Capital and US-based logistics and real estate investment company Realterm

Global. The fund will invest between Rs.29.77 billion and Rs.42.53 billion to set up warehouses across India’s seven key cities.

* Realterm FCH will build eight to 10 warehouses, which will also have parking for trucks, petrol pumps, some shops and food. Some warehouses could

cater to specific requirements of the food, pharmaceuticals or fashion industries

1 Source: KPMG

Some stipulations

Exemptions

! 100% FDI allowed for the development of these zones

! Minimum area to be developed under FTWZ is 0.5 mn.sq.mts

! Minimum outlay for the development of such zones is Rs.1 billion

! Supplier of material into the FTWZ shall be treated as physical exports for the Domestic Terrific Area (DTA) suppliers

! FTWZs' envisage duty free import of all goods for warehousing

! As far as bond towards customs duty on import is concerned, the units would be subject to similar provisions as are applicable to units in SEZs

! Packing or re-packing without processing and labeling as per customer or marketing requirements could be undertaken within the FTWZ

! Income Tax exemption as per 80 IA of the Income Tax Act

! Exemption from Service Tax

! Free foreign exchange currency transactions

! Other benefits as applicable to units in SEZs

16 17

Source: Knight Frank Research, www.sezindia.nic.in

www.knightfrank.com



Investment scenario in logistics sector

The logistics and warehousing sector, especially the much sought after 3PL services, have been witnessing sharp growth in last couple of years. Valued

at Rs.37.86 billion in 2005, the 3PL market in India is projected to grow at a CAGR of 21.9% from 2005 to 2012, reaching Rs.151.27 billion by the end

of 2012. Rapid growth in the Indian manufacturing sector is creating an increasing need for seamless logistics solutions. While the Indian 3PL market is

still very much in its infancy compared to those in other countries, it is experiencing healthy growth and attracting new companies eager to capitalise

on the plentiful opportunities it offers.

Currently, the trend of outsourcing the entire logistics function to a 3PL service provider is visible only in a few sectors in India. In the automotive sector,

for instance, end-to-end outsourcing is becoming increasingly popular as companies realise the benefits of focusing on core competencies and

delegating the logistics to 3PL service providers. Just-In-Time delivery (JIT) to the assembly line is another emerging concept that is gaining acceptance

in this sector. The penetration of 3PL services is particularly high in the automotive sector. Even companies that have traditionally adopted a

conservative business outlook have started outsourcing logistics to 3PL service providers. The IT hardware and electronics sectors are also witnessing a

rise in this trend, while those for fast moving consumer goods (FMCG) and pharmaceuticals have relatively low penetration rates.

As the Indian economy continues to grow at near double digit rates, the demand for logistics, as well as the sector itself, is rapidly increasing. India is

spending around Rs.4 trillion annually on logistics. The sector which has largely been under-owned and under-rated amongst all other sectors has

recently seen a large amount of interest from the Private Equity (PE) funds. The gestation period in the logistics sector is generally very high as

compared to other sectors. A large number of companies have been looking for opportunities to pick up stakes in the lesser known local logistics

players. From a long term perspective, the sector shall over the years, follow the path of consolidation, in terms of the number of players existing in the

market. The investments that have been made in the sector shall start giving returns only after a period of time however, the recent increase in petrol

and diesel prices has had an adverse impact on the stock market performance of the logistics companies.

Table 9: List of FTWZs in India

Sr. No Location Name of Developer Area (Ha) Approval Type

1 Village Srinagar and Ravirayal, FAB City SPV (India) Pvt. Ltd 120.06 Formal ApprovalMahewhwaram Mandal, Ranga Reddy

District, Andra Pradesh

2 Dighi Port, Raigad, Maharashtra Balaji Infra Projects Ltd (Port based) 100 Formal Approval

3 Mumbai Chiplun Infra Pvt. Ltd 40 Formal ApprovalFormerly M/s FTWZ Ltd.)

4 Mannur Village, Sriperembdur Taluka, J. Matadee Eco Parks Pvt. Ltd 40 NotifiedKancheepuram Dist, Tamil Nadu

5 Vallur Village, Ponneri Taluka, Tirvallur Jafza Chennai Business 136.8 Formal ApprovalDistrict, Tamil Nadu parks Pvt. Ltd

6 Greater Noida, Uttar Pradesh Free Trade Warehousing 80 In Principle ApprovalZone Pvt. Ltd

7 Kandla - Gujarat LMJ Warehousing Pvt. Ltd 40 In Principle Approval

8 Kochi FACT & Metals & Minerals 40 In Principle ApprovalTrading Corporation (MMTC)

9 Karnataka Shipco Infrastructure 120 In Principle ApprovalPvt. Ltd (SPIL)

10 Village SAI, Taluka Panvel, Maharashtra Arshiya Technologies 68 In Principle ApprovalInternational Ltd

11 Amritsar, Punjab M/s DLF Universal Ltd 40 In Principle Approval

12 Mangalore Suzlon Infrastructure Ltd. 486 In Principle Approval

Table 10: Investments in the logistics sector


Fund name Amount (Rs. mn) Target Firm

IDFC PE Fund II 1100 Sical Logistics

Kotak PE 1000 DRS Logistics

Clearstone Venture Advisors 160 Elbee Express

Tata Capital N.A Quickjet Cargo

Old Lane Opportunities Funds 1070 Sical Logistics

Blackstone 2420 Allcargo movers

Temasek Holdings 1000 First flight couriers ltd

Bennett Coleman & Company Limited N.A Airex Logistics

Realterm FCH Logistics Advisors Pvt. Ltd * -

Sidbi Venture Capital 88 Direct Logistics

Reliance Capital 500 BLR India

Erdene Capital PLC 854 MJ Logistics

New Vemon 532 Allcargo movers

IDFC PE 400 Delhi Assam roadways

* The fund will be set up through a 50:50 joint venture between Future Capital and US-based logistics and real estate investment company Realterm

Global. The fund will invest between Rs.29.77 billion and Rs.42.53 billion to set up warehouses across India’s seven key cities.

* Realterm FCH will build eight to 10 warehouses, which will also have parking for trucks, petrol pumps, some shops and food. Some warehouses could

cater to specific requirements of the food, pharmaceuticals or fashion industries

1 Source: KPMG

Some stipulations

Exemptions

! 100% FDI allowed for the development of these zones

! Minimum area to be developed under FTWZ is 0.5 mn.sq.mts

! Minimum outlay for the development of such zones is Rs.1 billion

! Supplier of material into the FTWZ shall be treated as physical exports for the Domestic Terrific Area (DTA) suppliers

! FTWZs' envisage duty free import of all goods for warehousing

! As far as bond towards customs duty on import is concerned, the units would be subject to similar provisions as are applicable to units in SEZs

! Packing or re-packing without processing and labeling as per customer or marketing requirements could be undertaken within the FTWZ

! Income Tax exemption as per 80 IA of the Income Tax Act

! Exemption from Service Tax

! Free foreign exchange currency transactions

! Other benefits as applicable to units in SEZs

16 17

Source: Knight Frank Research, www.sezindia.nic.in

www.knightfrank.com


Regulatory framework governing logistics and warehousing operations in India

Key benefits and proposed effects of the Warehousing Act, 2007 on the sector

The logistics and transportation sector in India has huge potential owing to the liberalisation of the Indian market. It is estimated that Rs.14 trillion

would be spent on infrastructure development like road connectivity, improvement of existing ports, creating new ports from 2005-06 to 2011-12,

amongst others.

The role of warehousing, both as a key physical (asset-based) infrastructure facility and as a systematic process of achieving logistics efficiencies at

various levels of supply chain management is increasingly becoming critical to operational effectiveness. With the rapid growth of both the primary

commodity and end-user retail markets, the need for a long-term industrial policy and well regulated growth of the warehousing infrastructure has

become critical for sustained economic growth. In order to attain the same, the Warehousing (Development & Regulation) Act was enacted in

December 2007.

! The Act enables the banks and other financial institutions to step into the commodities and warehousing sector

! Higher percentage participation from the private sector including development of modern warehousing infrastructure across the country

! Overall elevation of India's agricultural commodities sector, which has lacked adequate and quality warehousing facilities

! Higher transparency infusion into the sector leading to lower costs of financing in rural areas, efficient supply chains, better price-risk management

and rewards for better quality and grading

! Facilitation of the large private investment in warehousing, grading and storage businesses

! Facilitation of the electronic transfer of title

! Regulation of warehousing business by registering of the warehouses issuing negotiable warehouses receipts

In this segment of the report, the division of the zones and the segregation of states in each zone have been done as in the previous section.

18 19

North Zone

With states like Delhi, Haryana, Uttar Pradesh (UP) and Rajasthan, North India is one of the most sought after regions in the country. These states

together received a total FDI of Rs.461.6 billion in between 2000-2007. Delhi-NCR (which includes parts of Haryana, UP and Rajasthan) received a

maximum amount of Rs.441.25 billion as FDI during the same period, the primary reason being the high demand of consumer durables in the region.

The rate of increase of urban population is around 93% for Delhi-NCR, which ensures continual increase in demand for all kinds of goods. This is

supported by the fact that the growth of organised retail segment in Delhi-NCR has been the maximum in India.

Table 11: Supply statistics of 3PL operators in India


Sr No Name of the Organisation Total built up area (mn sq ft) No of warehouses

Existing Upcoming

1 Gati 0.6 5.0 200

2 Indo Arya 3.6 1.0 36

3 Reliance Logistics 1.0 1.0* 151

4 TCI 6.5 3.5 494

5 DRS Logistics 1.2 3.8 N.A.

6 AFL Dauscher 1.0 N.A 46

7 Safexpress 3.0 7.0 N.A.

8 Prologistics 3.5 3.5 35

TOTAL 20.4 23.8

* Only in the eastern region

Percentage Contribution for Logistic Demand

32%

14%18%

4%

6%

26%

Auto Component Pharmaceuticals FMCG Cement Textiles IT Components

According to Knight Frank Research, the following sectors are driving the demand for the 3PL and warehousing segment in the north zone:

With large number of infrastructure projects like Delhi-Mumbai Industrial Corridor, Kundli-Manesar-Palwal Expressway, Ganga Expressway,

Taj Expressway, redevelopment of airports at Udaipur, Amritsar, Lucknow, etc. having been announced in the entire northern region, the outlook for the

logistics sector seems bright.

Amongst the notable projects, Adani Logistics is coming up with a mega logistics park (180 acres) at Pataudi Road in Gurgaon. Companies like

DRS Logistics, Gateway District Parks and Prologistics have also come up with large-scale warehouses along the same road. The Garhi Harsaru Inland

Container Depot (ICD) lies in proximity to this stretch. The ICD at Gari Harsaru was bought by Gateway District Parks in 2005 for an amount of

Rs.170 million. This was a strategic move the company made keeping in mind that the area nearby would develop into a logistics and warehousing hub

for Delhi-NCR. The additional edge that this particular stretch has is that there is a culmination of the Kundli-Manesar-Palval Expressway and the rail link

between Delhi and Rewari. Currently most of logistics players are in the process of acquiring land on the Pataudi Road to build large-scale, high-quality

warehousing facilities.

Locations with logistics activity: North zone

STATE BOUNDARY

DISTRICT BOUNDARY

STATE CAPITAL

DISTRICT HEADQUARTER

WAREHOUSING HUB

SAHARANPUR

MUZAFFARNAGARBIJNOR

BAGHPAT

MEERUT

GHAZIABAD

BULANDSHAHAR

ALIGARH

HATHRAS ETAH

BUDAUNSHAHJAHANPUR

PILIBHIT

BAREILY

MORADABAD

HARDOI

SITAPUR

LAKHIMPUR

BAHRAICH

BALRAMPUR

BARABANKI

RAI BARELI

PRATAPGARH

HAMIPRPUR

JALAUN

JHANSIMAHOBA BANDA

CHITRAKUT ALLAHABAD

KAUSHAMBI

GYANPUR

MIRZAPUR

SONBHADRA

VARANASI

CHANDAULI

AZAMGARH

MAUNATH BHANAN

FAIZABAD

BASTI

KHALIABADDEORIA

KUSHINAGAR

MAHARAJGANJSIDHARTH NAGAR

BALLIA

JYOTIBA PHULENAGAR

AMBEDKARNAGAR

LALITPUR

FARRUKHABAD

GORAKHPURLUCKNOW

UNNAO

MATHURA

FIROZABAD

MAINPURI

AURAIYA

ETAWAH

KANPUR

FATEHPURGHAZIPUR

MAJOR LINKAGES

GANGA EXPRESSWAY

SHARAVSTI

Uttar Pradesh


www.knightfrank.com


Regulatory framework governing logistics and warehousing operations in India

Key benefits and proposed effects of the Warehousing Act, 2007 on the sector

The logistics and transportation sector in India has huge potential owing to the liberalisation of the Indian market. It is estimated that Rs.14 trillion

would be spent on infrastructure development like road connectivity, improvement of existing ports, creating new ports from 2005-06 to 2011-12,

amongst others.

The role of warehousing, both as a key physical (asset-based) infrastructure facility and as a systematic process of achieving logistics efficiencies at

various levels of supply chain management is increasingly becoming critical to operational effectiveness. With the rapid growth of both the primary

commodity and end-user retail markets, the need for a long-term industrial policy and well regulated growth of the warehousing infrastructure has

become critical for sustained economic growth. In order to attain the same, the Warehousing (Development & Regulation) Act was enacted in

December 2007.

! The Act enables the banks and other financial institutions to step into the commodities and warehousing sector

! Higher percentage participation from the private sector including development of modern warehousing infrastructure across the country

! Overall elevation of India's agricultural commodities sector, which has lacked adequate and quality warehousing facilities

! Higher transparency infusion into the sector leading to lower costs of financing in rural areas, efficient supply chains, better price-risk management

and rewards for better quality and grading

! Facilitation of the large private investment in warehousing, grading and storage businesses

! Facilitation of the electronic transfer of title

! Regulation of warehousing business by registering of the warehouses issuing negotiable warehouses receipts

In this segment of the report, the division of the zones and the segregation of states in each zone have been done as in the previous section.

18 19

North Zone

With states like Delhi, Haryana, Uttar Pradesh (UP) and Rajasthan, North India is one of the most sought after regions in the country. These states

together received a total FDI of Rs.461.6 billion in between 2000-2007. Delhi-NCR (which includes parts of Haryana, UP and Rajasthan) received a

maximum amount of Rs.441.25 billion as FDI during the same period, the primary reason being the high demand of consumer durables in the region.

The rate of increase of urban population is around 93% for Delhi-NCR, which ensures continual increase in demand for all kinds of goods. This is

supported by the fact that the growth of organised retail segment in Delhi-NCR has been the maximum in India.

Table 11: Supply statistics of 3PL operators in India


Sr No Name of the Organisation Total built up area (mn sq ft) No of warehouses

Existing Upcoming

1 Gati 0.6 5.0 200

2 Indo Arya 3.6 1.0 36

3 Reliance Logistics 1.0 1.0* 151

4 TCI 6.5 3.5 494

5 DRS Logistics 1.2 3.8 N.A.

6 AFL Dauscher 1.0 N.A 46

7 Safexpress 3.0 7.0 N.A.

8 Prologistics 3.5 3.5 35

TOTAL 20.4 23.8

* Only in the eastern region


32%

14%18%

4%

6%

26%


According to Knight Frank Research, the following sectors are driving the demand for the 3PL and warehousing segment in the north zone:

With large number of infrastructure projects like Delhi-Mumbai Industrial Corridor, Kundli-Manesar-Palwal Expressway, Ganga Expressway,

Taj Expressway, redevelopment of airports at Udaipur, Amritsar, Lucknow, etc. having been announced in the entire northern region, the outlook for the

logistics sector seems bright.

Amongst the notable projects, Adani Logistics is coming up with a mega logistics park (180 acres) at Pataudi Road in Gurgaon. Companies like

DRS Logistics, Gateway District Parks and Prologistics have also come up with large-scale warehouses along the same road. The Garhi Harsaru Inland

Container Depot (ICD) lies in proximity to this stretch. The ICD at Gari Harsaru was bought by Gateway District Parks in 2005 for an amount of

Rs.170 million. This was a strategic move the company made keeping in mind that the area nearby would develop into a logistics and warehousing hub

for Delhi-NCR. The additional edge that this particular stretch has is that there is a culmination of the Kundli-Manesar-Palval Expressway and the rail link

between Delhi and Rewari. Currently most of logistics players are in the process of acquiring land on the Pataudi Road to build large-scale, high-quality

warehousing facilities.

Locations with logistics activity: North zone

STATE BOUNDARY

DISTRICT BOUNDARY

STATE CAPITAL


WAREHOUSING HUB

SAHARANPUR

MUZAFFARNAGARBIJNOR

BAGHPAT

MEERUT

GHAZIABAD

BULANDSHAHAR

ALIGARH

HATHRAS ETAH

BUDAUNSHAHJAHANPUR

PILIBHIT

BAREILY

MORADABAD

HARDOI

SITAPUR

LAKHIMPUR

BAHRAICH

BALRAMPUR

BARABANKI

RAI BARELI

PRATAPGARH

HAMIPRPUR

JALAUN

JHANSIMAHOBA BANDA

CHITRAKUT ALLAHABAD

KAUSHAMBI

GYANPUR

MIRZAPUR

SONBHADRA

VARANASI

CHANDAULI

AZAMGARH

MAUNATH BHANAN

FAIZABAD

BASTI

KHALIABADDEORIA

KUSHINAGAR

MAHARAJGANJSIDHARTH NAGAR

BALLIA

JYOTIBA PHULENAGAR

AMBEDKARNAGAR

LALITPUR

FARRUKHABAD

GORAKHPURLUCKNOW

UNNAO

MATHURA

FIROZABAD

MAINPURI

AURAIYA

ETAWAH

KANPUR

FATEHPURGHAZIPUR

MAJOR LINKAGES

GANGA EXPRESSWAY

SHARAVSTI

Uttar Pradesh


www.knightfrank.com


STATE BOUNDARY

DISTRICT BOUNDARY

STATE CAPITAL


WAREHOUSING HUB

JALORE

SIROHI

DUNGARPUR

BANSWARA

CHITTAURGARH

PALI

BARMER

JODHAPUR

JAISALMER

BIKANER

CHURU

NAGAUR

TONK

JAIPUR

DAUSADAUSA

HANUMANGARHGANGANAGAR

JHUNJHUNU

SIKARALWAR

BHARATPUR

DHAULPUR

KARAULI

SAWAIMADHOPUR

BHILWARA

BUNDI

BARANKOTA

JHALAWAR

RAJSAMAND

UDAIPUR

GOLDEN QUADRILATERAL

EAST-WEST CORRIDOR

AJMER

Rajasthan East Zone

The eastern region constitutes about 21% of the total area of India. The prominent states in the region include West Bengal, Orissa, Bihar, Jharkhand

and Assam. Between 2000 and 2007, the total FDI that the region received was approximately Rs.36.1 billion. West Bengal received a maximum of

Rs.31.79 billion as FDI during the same period. The state has over the last 8-10 years experienced large-scale transformation with a focused approach

towards attracting investments. Initiatives like providing single window clearances and facilitating prospective entrepreneurial interest has accelerated

the said process.

According to Knight Frank Research, the classification of the sectors driving the demand for the 3PL and warehousing segment in the eastern zone is

given below:Percentage Contribution for Logistic Demand

44%

8%6%7%

11%

9%

15%

Steel Food products Electronic goods Textile/Apparels Auto components Petrochemicals FMCG

According to the Government of West Bengal, the growth of the IT sector in West Bengal has been faster than the overall IT sector growth in India. With

locations like Rajarhat and Salt Lake developing into IT/ITES hubs, the demand for organised retailing is on the rise which is also expected to lead to

better quality of road infrastructure. Locations like Siliguri, Bhubhaneshwar, Ranchi, Burdwan, etc. are expected to come up in the future as important

logistics and warehousing hubs for the eastern region.

Some of the proposed infrastructure projects include Eastern Link Highway (stretching around 100 kms between NH-31 and NH-117), upgradation of

NH-34 to 4-lane status (connecting Kolkata with South and North Bengal), modernisation of the Netaji Subhash Chandra Bose airport, etc. Besides,

Dedicated Freight Corridor Corporation of India (DFCCI) has proposed to develop a Dedicated Freight Corridor (DFC) from Ludhiana to Son Nagar

(near Patna), with extensions to Duragapur/Bokaro/Tata Nagar. The corridor is expected to be spread across a total length of 1,280 kms.

Some of the upcoming projects include an FTWZ by Reliance Logistics around the Kona expressway and the Kolkata-Delhi National Highway (NH-2),

Kolkata International Logistics City (KILC, Howrah), and a 200-acre Auto SEZ at Guptamani (Kharagpur). The first phase of the Rs.10 billion KILC is

expected to be ready for handover in another 8-10 months and the entire logistics and distribution hub is expected to be completed in five years.

STATE BOUNDARY

DISTRICT BOUNDARY

STATE CAPITAL


WAREHOUSING HUB

BHIWANI

HISAR

SIRSA

FATEHABAD

KAITHALKARNAL

KURUKSHETRA

YAMUNANAGAR

AMBALA

PANCHKULA

JIND PANIPAT

SONIPAT

MAHENDRAGARH

MEWAT

GURGAON

PATAUDI

ROHTAK

JHAAJJAR

REWARI

TO KOLKATAGOLDEN QUADRILATERAL

DMIC

KUNDLI

Haryana

FARIDABAD

CHANDIGARH

STATE BOUNDARY

DISTRICT BOUNDARY

STATE CAPITAL


WAREHOUSING HUB

MAJOR LINKAGES

DARJEELING

JALPAIGURI

KOCH BIHAR

RAIGANJ

BALURGHAT

ENGLISH BAZAR

BEHRAMPUR

BIRBHUM

BARDDHAMAN KRISHNANAGAR

BANKURA

PURULIYA

MEDINIPUR

HOOGLY

KOLKATA

SOUTH 24-PARAGANAS

TAMLUK

NORTH 24-PARAGANAS

TO DELHI

TO CHENNAI

TO KANPUR

TO SILCHAR

DURGAPUR

Locations with logistics activity: East zone

West Bengal

HOWRAH


www.knightfrank.com


STATE BOUNDARY

DISTRICT BOUNDARY

STATE CAPITAL


WAREHOUSING HUB

JALORE

SIROHI

DUNGARPUR

BANSWARA

CHITTAURGARH

PALI

BARMER

JODHAPUR

JAISALMER

BIKANER

CHURU

NAGAUR

TONK

JAIPUR

DAUSADAUSA

HANUMANGARHGANGANAGAR

JHUNJHUNU

SIKARALWAR

BHARATPUR

DHAULPUR

KARAULI

SAWAIMADHOPUR

BHILWARA

BUNDI

BARANKOTA

JHALAWAR

RAJSAMAND

UDAIPUR


EAST-WEST CORRIDOR

AJMER

Rajasthan East Zone

The eastern region constitutes about 21% of the total area of India. The prominent states in the region include West Bengal, Orissa, Bihar, Jharkhand

and Assam. Between 2000 and 2007, the total FDI that the region received was approximately Rs.36.1 billion. West Bengal received a maximum of

Rs.31.79 billion as FDI during the same period. The state has over the last 8-10 years experienced large-scale transformation with a focused approach

towards attracting investments. Initiatives like providing single window clearances and facilitating prospective entrepreneurial interest has accelerated

the said process.

According to Knight Frank Research, the classification of the sectors driving the demand for the 3PL and warehousing segment in the eastern zone is

given below:Percentage Contribution for Logistic Demand

44%

8%6%7%

11%

9%

15%

Steel Food products Electronic goods Textile/Apparels Auto components Petrochemicals FMCG

According to the Government of West Bengal, the growth of the IT sector in West Bengal has been faster than the overall IT sector growth in India. With

locations like Rajarhat and Salt Lake developing into IT/ITES hubs, the demand for organised retailing is on the rise which is also expected to lead to

better quality of road infrastructure. Locations like Siliguri, Bhubhaneshwar, Ranchi, Burdwan, etc. are expected to come up in the future as important

logistics and warehousing hubs for the eastern region.

Some of the proposed infrastructure projects include Eastern Link Highway (stretching around 100 kms between NH-31 and NH-117), upgradation of

NH-34 to 4-lane status (connecting Kolkata with South and North Bengal), modernisation of the Netaji Subhash Chandra Bose airport, etc. Besides,

Dedicated Freight Corridor Corporation of India (DFCCI) has proposed to develop a Dedicated Freight Corridor (DFC) from Ludhiana to Son Nagar

(near Patna), with extensions to Duragapur/Bokaro/Tata Nagar. The corridor is expected to be spread across a total length of 1,280 kms.

Some of the upcoming projects include an FTWZ by Reliance Logistics around the Kona expressway and the Kolkata-Delhi National Highway (NH-2),

Kolkata International Logistics City (KILC, Howrah), and a 200-acre Auto SEZ at Guptamani (Kharagpur). The first phase of the Rs.10 billion KILC is

expected to be ready for handover in another 8-10 months and the entire logistics and distribution hub is expected to be completed in five years.

STATE BOUNDARY

DISTRICT BOUNDARY

STATE CAPITAL


WAREHOUSING HUB

BHIWANI

HISAR

SIRSA

FATEHABAD

KAITHALKARNAL

KURUKSHETRA

YAMUNANAGAR

AMBALA

PANCHKULA

JIND PANIPAT

SONIPAT

MAHENDRAGARH

MEWAT

GURGAON

PATAUDI

ROHTAK

JHAAJJAR

REWARI

TO KOLKATAGOLDEN QUADRILATERAL

DMIC

KUNDLI

Haryana

FARIDABAD

CHANDIGARH

STATE BOUNDARY

DISTRICT BOUNDARY

STATE CAPITAL


WAREHOUSING HUB

MAJOR LINKAGES

DARJEELING

JALPAIGURI

KOCH BIHAR

RAIGANJ

BALURGHAT

ENGLISH BAZAR

BEHRAMPUR

BIRBHUM

BARDDHAMAN KRISHNANAGAR

BANKURA

PURULIYA

MEDINIPUR

HOOGLY

KOLKATA

SOUTH 24-PARAGANAS

TAMLUK

NORTH 24-PARAGANAS

TO DELHI

TO CHENNAI

TO KANPUR

TO SILCHAR

DURGAPUR

Locations with logistics activity: East zone

West Bengal

HOWRAH


www.knightfrank.com


South Zone

South India, because of its superior connectivity, owing to the presence of state-of-the-art port facilities and an intricate road and rail network, and

presence of organised markets in the retail sector, has always been considered to be a preferred region for setting up logistical/warehousing units.



35%

20%15%

9%

11%

10%

The logistics industry has grown by leaps and bounds in the south. Traditionally, companies in the south used to take care of their own logistical

solutions but with economic empowerment there is a need to improve backward and forward linkages with leading companies looking at outsourcing

their operational requirements. Auto components, textile and retail industries are considered to be the major drivers for warehousing industry. In fact,

the rapid growth of organised retail space has led to a corresponding demand for quality logistics and warehousing solutions, generating a host of 3PL

companies.

Chennai is gradually emerging as the key warehousing hub in the south because of its strong infrastructural support, good connectivity and presence of

ports. The NH-4 which links Chennai to the western cities like Bengaluru and Mumbai has become the source of warehousing operation in the state.

The northern locations of the city like Madhavaram and Red Hills which connects to the cities of Hyderabad and Kolkata in the east have also grown in

prominence in warehousing space. Other important warehousing locations in the state include Trivotriyur, Minjur, Poonamallee, Sriperumbudur,

Irungatakottai, Chrompet, Numbal, Hosur and Madurai. The development of the Ennore port is expected to considerably increase the potential of the

state with respect to 3PL. Vishakapatnam in Andhra Pradesh, which also has fairly good connectivity and the presence of a strong port, might prove to

be a competitor to Chennai in a couple of years.

Locations with logistics activity: South zone

CHITTOOR

NELLORE

CUDDAPAH

ANANTAPUR

KURNOOL PRAKASAM

GUNTUR

MAHBUBNAGAR

NALGONDA

RANGAREDDY

MEDAK

NIZAMABADKARIMNAGAR

WARANGALKHAMMAM

WEST GODAVARI

VISHAKHAPATNAM

EASTGODAVARI

VIZIANAGARAM

ADILABAD

KRISHNA

HYDERABAD

TO NAGPUR

TO CHENNAI

VIJAYWADA

STATE BOUNDARY

DISTRICT BOUNDARY

STATE CAPITAL


WAREHOUSING HUB

KARNATAKA

MAJOR LINKAGES

SRIKAKULAM

Andhra Pradesh

Locations in Andhra Pradesh like Hyderabad are also expected to witness growth in 3PL space particularly in the temperature controlled warehouses due

to the demand from the pharmaceutical and organised retail industry. Leading 3PL providers like Gati and Indo Arya have identified Hyderabad as a

potential investment destination. Other important locations in the state include Vishakapatnam, Vijaywada, Medchal, Kompally and Kukatpally.

Bengaluru is considered to be the most important hub for logistics and warehousing in Karnataka with Peenya and Whitefield being the most sought

after locations for 3PL in the state. The other major locations for logistics and warehousing in Karnataka include Mysore Road, Mangalore, Hoskote,

Davengere and Belgaum. The emergence of Bengaluru as a biotechnology hub with the presence of leading companies in the sector like Biocon has

increased the potential of the city as a feeder for logistics and warehousing, both within the state and outside. The growth of southern Bengaluru

especially around the Electronic City has inadvertently led to the development of Hosur in Tamil Nadu, due to its proximity to Bengaluru, being looked

at as a prime logistics destination. This aspect is being exploited by Tamil Nadu by offering very competitive land rates as opposed to that in Karnataka

causing friction between the two states

UTTARKANNAD

BELGAUM

BAGALKOTRAICHUR

KOPPAL

BELLARY

DAVANGERE

GADAG

DHARWAR

HAVERI

SHIMOGA

UDUPICHIKAMAGALUR TUMKUR

KOLAR

MANDYA

KODAGUMYSORE

CHAMRAJNAGAR

BIJAPUR

GULBARGA

STATE BOUNDARY

DISTRICT BOUNDARY

STATE CAPITAL


WAREHOUSING HUB

MAJOR LINKAGES

ERALA

K

TO HYDERABADCHITRADURGA

BENGALURU

Karnataka

TIRUVANNAMALAI

VELLORE

VILUPPURM

ERODE

NAMAKKAL

COIMBATORE

NILGIRIS

KARUR

ARIYALUR

THANJAVUR

TIRUVARUR

NAGAPATTINAM

CUDDALORE

DINDIGULPUDUKKOTTA

TENI MADURAISIVAGANGAL

RAMANATHAPURAM

VIRUDUNAGAR

TUTICORIN

TIRUNELVELI

KANYAKUMARI

TIRUCHCHIRAPPALLI

PERAMBAUR

KANCHIPURAM

TIRUVALLUR

STATE BOUNDARY

DISTRICT BOUNDARY

STATE CAPITAL


WAREHOUSING HUB

MAJOR LINKAGES

TO BANGLORE

TO HYDERABAD

CHENNAI

DHARMAPURI

SALEM

Tamil NaduSource: Knight Frank Research

www.knightfrank.com


South Zone

South India, because of its superior connectivity, owing to the presence of state-of-the-art port facilities and an intricate road and rail network, and

presence of organised markets in the retail sector, has always been considered to be a preferred region for setting up logistical/warehousing units.



35%

20%15%

9%

11%

10%

The logistics industry has grown by leaps and bounds in the south. Traditionally, companies in the south used to take care of their own logistical

solutions but with economic empowerment there is a need to improve backward and forward linkages with leading companies looking at outsourcing

their operational requirements. Auto components, textile and retail industries are considered to be the major drivers for warehousing industry. In fact,

the rapid growth of organised retail space has led to a corresponding demand for quality logistics and warehousing solutions, generating a host of 3PL

companies.

Chennai is gradually emerging as the key warehousing hub in the south because of its strong infrastructural support, good connectivity and presence of

ports. The NH-4 which links Chennai to the western cities like Bengaluru and Mumbai has become the source of warehousing operation in the state.

The northern locations of the city like Madhavaram and Red Hills which connects to the cities of Hyderabad and Kolkata in the east have also grown in

prominence in warehousing space. Other important warehousing locations in the state include Trivotriyur, Minjur, Poonamallee, Sriperumbudur,

Irungatakottai, Chrompet, Numbal, Hosur and Madurai. The development of the Ennore port is expected to considerably increase the potential of the

state with respect to 3PL. Vishakapatnam in Andhra Pradesh, which also has fairly good connectivity and the presence of a strong port, might prove to

be a competitor to Chennai in a couple of years.

Locations with logistics activity: South zone

CHITTOOR

NELLORE

CUDDAPAH

ANANTAPUR

KURNOOL PRAKASAM

GUNTUR

MAHBUBNAGAR

NALGONDA

RANGAREDDY

MEDAK

NIZAMABADKARIMNAGAR

WARANGALKHAMMAM

WEST GODAVARI

VISHAKHAPATNAM

EASTGODAVARI

VIZIANAGARAM

ADILABAD

KRISHNA

HYDERABAD

TO NAGPUR

TO CHENNAI

VIJAYWADA

STATE BOUNDARY

DISTRICT BOUNDARY

STATE CAPITAL


WAREHOUSING HUB

KARNATAKA

MAJOR LINKAGES

SRIKAKULAM

Andhra Pradesh

Locations in Andhra Pradesh like Hyderabad are also expected to witness growth in 3PL space particularly in the temperature controlled warehouses due

to the demand from the pharmaceutical and organised retail industry. Leading 3PL providers like Gati and Indo Arya have identified Hyderabad as a

potential investment destination. Other important locations in the state include Vishakapatnam, Vijaywada, Medchal, Kompally and Kukatpally.

Bengaluru is considered to be the most important hub for logistics and warehousing in Karnataka with Peenya and Whitefield being the most sought

after locations for 3PL in the state. The other major locations for logistics and warehousing in Karnataka include Mysore Road, Mangalore, Hoskote,

Davengere and Belgaum. The emergence of Bengaluru as a biotechnology hub with the presence of leading companies in the sector like Biocon has

increased the potential of the city as a feeder for logistics and warehousing, both within the state and outside. The growth of southern Bengaluru

especially around the Electronic City has inadvertently led to the development of Hosur in Tamil Nadu, due to its proximity to Bengaluru, being looked

at as a prime logistics destination. This aspect is being exploited by Tamil Nadu by offering very competitive land rates as opposed to that in Karnataka

causing friction between the two states

UTTARKANNAD

BELGAUM

BAGALKOTRAICHUR

KOPPAL

BELLARY

DAVANGERE

GADAG

DHARWAR

HAVERI

SHIMOGA

UDUPICHIKAMAGALUR TUMKUR

KOLAR

MANDYA

KODAGUMYSORE

CHAMRAJNAGAR

BIJAPUR

GULBARGA

STATE BOUNDARY

DISTRICT BOUNDARY

STATE CAPITAL


WAREHOUSING HUB

MAJOR LINKAGES

ERALA

K

TO HYDERABADCHITRADURGA

BENGALURU

Karnataka

TIRUVANNAMALAI

VELLORE

VILUPPURM

ERODE

NAMAKKAL

COIMBATORE

NILGIRIS

KARUR

ARIYALUR

THANJAVUR

TIRUVARUR

NAGAPATTINAM

CUDDALORE

DINDIGULPUDUKKOTTA

TENI MADURAISIVAGANGAL

RAMANATHAPURAM

VIRUDUNAGAR

TUTICORIN

TIRUNELVELI

KANYAKUMARI

TIRUCHCHIRAPPALLI

PERAMBAUR

KANCHIPURAM

TIRUVALLUR

STATE BOUNDARY

DISTRICT BOUNDARY

STATE CAPITAL


WAREHOUSING HUB

MAJOR LINKAGES

TO BANGLORE

TO HYDERABAD

CHENNAI

DHARMAPURI

SALEM

Tamil NaduSource: Knight Frank Research

www.knightfrank.com


West Zone

The states in the west zone include Maharashtra and Gujarat. The west zone is considered to be one of the most active zones with regard to the

logistic/warehousing space. Factors like presence of well developed infrastructure, strong presence of industry, establishment of mature markets, etc.

have led to a concurrent demand for organised logistics solutions with respect to forward and backward linkages. This zone also has the presence of

established ports like Kandla and JNPT which are providing important sea linkages.

The Golden Triangle of Maharashtra namely Mumbai, Pune and Nashik along with Nagpur is witnessing the maximum interest in the warehousing and

logistical space. As with the other zones the growth of the retail sector is the main factor driving the growth of 3PL. Nagpur, due to its central location,

has been identified as the major logistic hub in the country. The setting up of the proposed cargo hub at Nagpur is expected to give a fillip to the

logistics and warehousing segment. Gati, one of the premier 3PL providers in the country, has identified Nagpur as its central distribution centre from

where goods will be moved to different distribution outlets across the country. Presently, the prevalence of the octroi duty in Maharashtra is acting as an

entry barrier in the sector; its gradual phasing out would see increased interest to acquire more property from major 3PL providers. Locations within the

state besides those already mentioned where warehousing activity is prevalent are Bhiwandi, Vashi, Waluj, Doli, Dharamtar and Kalamboli.

JUNAGADH

AMRELI

RAJKOTJAMNAGAR

PORBANDAR

BHAVNAGAR

SURENDERNAGAR

AHMEDABAD

ANAND

SURAT

THE DANGS

NAVSARI

VALSAD

VADODARA

NARMADA

KHEDAPANCH MAHAL

SABARKANTHA

GANDHINAGAR

PATAN

MAHESANA

BANASKANTHA

KACHCHH

STATE BOUNDARY

DISTRICT BOUNDARY

STATE CAPITAL


WAREHOUSING HUB

MAJOR LINKAGES

BHARUCH

KANDLA PORT

Gujarat

Locations with logistics activity: West zone

Gujarat with its superior infrastructure and pro-developmental policies ranks high in the list of preferred 3PL destinations. Sarkej, just off Ahmedabad

city has some of the most prolific 3PL activity in the state. The development of the Delhi Mumbai Infrastructure Corridor is also expected to increase the

investment inflow from logistics providers into the state. The high internal connectivity and proactive governance has made the state a favourable

investment destination for the logistics sector. The rental values in the state for warehousing operators are low, ranging between Rs.8-12/sq.ft. per

month. The relative absence of the service industry, predominantly IT/ITES, has affected the state's visibility with respect to other industrial states. Major

warehousing locations, other than the ones already mentioned, include Baroda, Hazira, Jhagadia, Kandla, Ranoli, Surat, Umbergaon, Unjha and

Viramgam.

Table 12: Average rentals for warehousing space

State Location Warehousing Rentals

(Rs./sq.ft. per month)

New Delhi Okhla 30 - 65

Haryana Bhiwadi, Manesar, Sonepat 10 - 20

Uttar Pradesh Ghaziabad, Noida 10 - 14

West Bengal Kolkata 15 - 20

Karnataka Peenya 15 - 20

Tamil Nadu Red Hills 19 - 28

Andhra Pradesh Medchal 12 - 18

Maharashtra Panvel, Bhiwandi 15 - 20

Gujarat Sarkej 10 - 15

The average rental values at prominent warehousing locations across the selected states are as given below. The locations mentioned are those where

warehousing activity is prolific.

STATE BOUNDARY

DISTRICT BOUNDARY

STATE CAPITAL


WAREHOUSING HUB

MAJOR LINKAGES

ANDHRA PRADESH

NANDED

LATUR

OSMANABAD

JALNA

PARBHANI

HINGOLI

YAVATMALCHANDRAPUR

GADCHIROLIAHMADNAGAR

SOLAPURSATARA

SANGLI

KOLHAPUR

RATNAGIRI

BEED

PUNE

RAIGARH

NASHIK

AURANGABAD

JALGAONDHULE

BULDHANA WASHIM

AKOLA

AMRAVATI NAGPUR BHANDARA

GONDIA

NANDURBAR

MUMBAI

WARDHA

Maharashtra

THANE


32%

13%20%

8%

14%

13%




www.knightfrank.com


West Zone

The states in the west zone include Maharashtra and Gujarat. The west zone is considered to be one of the most active zones with regard to the

logistic/warehousing space. Factors like presence of well developed infrastructure, strong presence of industry, establishment of mature markets, etc.

have led to a concurrent demand for organised logistics solutions with respect to forward and backward linkages. This zone also has the presence of

established ports like Kandla and JNPT which are providing important sea linkages.

The Golden Triangle of Maharashtra namely Mumbai, Pune and Nashik along with Nagpur is witnessing the maximum interest in the warehousing and

logistical space. As with the other zones the growth of the retail sector is the main factor driving the growth of 3PL. Nagpur, due to its central location,

has been identified as the major logistic hub in the country. The setting up of the proposed cargo hub at Nagpur is expected to give a fillip to the

logistics and warehousing segment. Gati, one of the premier 3PL providers in the country, has identified Nagpur as its central distribution centre from

where goods will be moved to different distribution outlets across the country. Presently, the prevalence of the octroi duty in Maharashtra is acting as an

entry barrier in the sector; its gradual phasing out would see increased interest to acquire more property from major 3PL providers. Locations within the

state besides those already mentioned where warehousing activity is prevalent are Bhiwandi, Vashi, Waluj, Doli, Dharamtar and Kalamboli.

JUNAGADH

AMRELI

RAJKOTJAMNAGAR

PORBANDAR

BHAVNAGAR

SURENDERNAGAR

AHMEDABAD

ANAND

SURAT

THE DANGS

NAVSARI

VALSAD

VADODARA

NARMADA

KHEDAPANCH MAHAL

SABARKANTHA

GANDHINAGAR

PATAN

MAHESANA

BANASKANTHA

KACHCHH

STATE BOUNDARY

DISTRICT BOUNDARY

STATE CAPITAL


WAREHOUSING HUB

MAJOR LINKAGES

BHARUCH

KANDLA PORT

Gujarat

Locations with logistics activity: West zone

Gujarat with its superior infrastructure and pro-developmental policies ranks high in the list of preferred 3PL destinations. Sarkej, just off Ahmedabad

city has some of the most prolific 3PL activity in the state. The development of the Delhi Mumbai Infrastructure Corridor is also expected to increase the

investment inflow from logistics providers into the state. The high internal connectivity and proactive governance has made the state a favourable

investment destination for the logistics sector. The rental values in the state for warehousing operators are low, ranging between Rs.8-12/sq.ft. per

month. The relative absence of the service industry, predominantly IT/ITES, has affected the state's visibility with respect to other industrial states. Major

warehousing locations, other than the ones already mentioned, include Baroda, Hazira, Jhagadia, Kandla, Ranoli, Surat, Umbergaon, Unjha and

Viramgam.

Table 12: Average rentals for warehousing space

State Location Warehousing Rentals

(Rs./sq.ft. per month)

New Delhi Okhla 30 - 65

Haryana Bhiwadi, Manesar, Sonepat 10 - 20

Uttar Pradesh Ghaziabad, Noida 10 - 14

West Bengal Kolkata 15 - 20

Karnataka Peenya 15 - 20

Tamil Nadu Red Hills 19 - 28

Andhra Pradesh Medchal 12 - 18

Maharashtra Panvel, Bhiwandi 15 - 20

Gujarat Sarkej 10 - 15

The average rental values at prominent warehousing locations across the selected states are as given below. The locations mentioned are those where

warehousing activity is prolific.

STATE BOUNDARY

DISTRICT BOUNDARY

STATE CAPITAL


WAREHOUSING HUB

MAJOR LINKAGES

ANDHRA PRADESH

NANDED

LATUR

OSMANABAD

JALNA

PARBHANI

HINGOLI

YAVATMALCHANDRAPUR

GADCHIROLIAHMADNAGAR

SOLAPURSATARA

SANGLI

KOLHAPUR

RATNAGIRI

BEED

PUNE

RAIGARH

NASHIK

AURANGABAD

JALGAONDHULE

BULDHANA WASHIM

AKOLA

AMRAVATI NAGPUR BHANDARA

GONDIA

NANDURBAR

MUMBAI

WARDHA

Maharashtra

THANE


32%

13%20%

8%

14%

13%




www.knightfrank.com


2. Eastern Freight Corridor

Project Hightlights

3. Golden Quadrilateral

Economic benefits

4. North South and East West Corridor (NSEW)

Along with the Western Freight Corridor or DMIC, on which the work has already started, the Government of India is also proposing an Eastern Freight

Corridor on the same lines.

This will run from Ludhiana in Punjab to Son Nagar in Bihar, with feeder routes extending upto Amritsar in north and Durgapur/Tatanagar in eastern

India.

! Route: Son Nagar-Mughalsarai-Allahabad-Khurja-Ludhiana

! Route Length: 1,280 km

! No. of Lines: Double (Single between Khurja and Ludhiana)

! Maximum Speed: 100 kmph

! Feeder Routes: 2,841 km

! Fit for double stack container operation

! Capable of 30-32.5 tonnes axle load

! Upgradation of 4,500 km feeder routes for Eastern and Western corridors fit for 25 tonne axle load

The Golden Quadrilateral (GQ) is the largest express highway project in India. It is the first phase of the National Highways Development Project

(NHDP), and consists of building 5,846 kms of four/six lane express highways connecting Delhi, Mumbai, Kolkata and Chennai, at a cost of

Rs.580 billion. According to National Highways Authority of India statistics, as of September 2007, 96% of the entire work has been completed.

The GQ highway project will interconnect many major cities and ports. It will give an impetus to truck transport throughout India as well as aid in the

industrial growth of all small towns through which it passes. It will also provide vast opportunities for transport of agricultural produce from the

hinterland to major cities and ports for export. In addition, it will provide job opportunities in its construction as well as demand for cement, steel and

other construction materials.

The North South-East West Corridor is the largest ongoing expressway project in India. It is the second phase of the National Highways Development

Project (NHDP), and consists of building 7,300 km of four/six lane expressways connecting Srinagar, Kanyakumari, Porbandar and Silchar. As of

September 2007, 20.37% of the entire work has been completed, with the final completion date set as February 28, 2009.

Brief on major infrastructural projects affecting logistics in India

1. Delhi Mumbai Industrial Corridor (DMIC)

Short listed industrial areas

Industrial infrastructure

Developing logistics facilities

Infrastructure forms a key parameter for development and operations of the industrial sector as well as for the logistics and warehousing. Therefore, we

have mentioned a few important infrastructural projects in the country, which will not just help in improving the connectivity across the length and

breadth of the country but will also act as a catalyst of increased logistics activities around them.

Background:

! 1,483 km long western Dedicated Freight Corridor (DFC) project between Delhi & Mumbai to be commissioned by 2012

! An MOU was signed between MoCI and METI, Japan in December, 2006 to create a framework for mutual cooperation for the project

! GOI initiated the DMIC to leverage the economic benefits arising from the western dedicated freight corridor

! GOI accorded 'in principle' approval to the DMIC Project Outline in August, 2007

! Meerut-Muzaffarnagar (Uttar Pradesh)

! Faridabad-Palwal (Haryana)

! Jaipur-Dausa (Rajasthan)

! Vadodara-Ankleshwar (Gujarat)

! Dighi Port (Maharashtra)

! Nimach-Nayagaon (Madhya Pradesh)

! New industrial clusters/ parks/ SEZs

! Upgradation of existing industrial estates/clusters

! Modern integrated agro-processing zones with allied infrastructure

! IT/ITES hubs and other allied infrastructure

! Efficient logistics chain with integrated multi-modal logistic hubs

Each common Investment Region/Industrial Area (IR/IA) will be provided with modern logistics infrastructure to serve containerised and

non-containerised cargo. The Integrated Multimodal Logistics Hubs will be situated at:

! Bawal and Palwal, Haryana

! Ajmer/Marwar, Rajasthan

! Palanpur in Gujarat

! Nashik, Pune in Maharashtra

! Dewas and Indore in Madhya Pradesh

! Envisaged port (Container, Ro-Ro, Bulk) terminals

! Bulk terminal, Ro-Ro facility at Dahej

! Break-Bulk terminal, Ro-Ro Facility at Maroli

! Container terminals at Hazira, Dighi ports

! State-of-the-Art Warehousing zones to be provided with inventory management and communication system integrating logistics components as well

as facilitating 3PL operators

DMIC route map

Map depicting Golden Quadrilateral and NSEW Corridor


NORTH-SOUTH CORRIDOR

EAST-WEST CORRIDOR

26 27

DURGAPUR

LUDHIANA

DADRI

KANPUR

MUGHAL SARAI

RAJASTHAN

MADHYA PRADESH

www.knightfrank.com


2. Eastern Freight Corridor

Project Hightlights

3. Golden Quadrilateral

Economic benefits

4. North South and East West Corridor (NSEW)

Along with the Western Freight Corridor or DMIC, on which the work has already started, the Government of India is also proposing an Eastern Freight

Corridor on the same lines.

This will run from Ludhiana in Punjab to Son Nagar in Bihar, with feeder routes extending upto Amritsar in north and Durgapur/Tatanagar in eastern

India.

! Route: Son Nagar-Mughalsarai-Allahabad-Khurja-Ludhiana

! Route Length: 1,280 km

! No. of Lines: Double (Single between Khurja and Ludhiana)

! Maximum Speed: 100 kmph

! Feeder Routes: 2,841 km

! Fit for double stack container operation

! Capable of 30-32.5 tonnes axle load

! Upgradation of 4,500 km feeder routes for Eastern and Western corridors fit for 25 tonne axle load

The Golden Quadrilateral (GQ) is the largest express highway project in India. It is the first phase of the National Highways Development Project

(NHDP), and consists of building 5,846 kms of four/six lane express highways connecting Delhi, Mumbai, Kolkata and Chennai, at a cost of

Rs.580 billion. According to National Highways Authority of India statistics, as of September 2007, 96% of the entire work has been completed.

The GQ highway project will interconnect many major cities and ports. It will give an impetus to truck transport throughout India as well as aid in the

industrial growth of all small towns through which it passes. It will also provide vast opportunities for transport of agricultural produce from the

hinterland to major cities and ports for export. In addition, it will provide job opportunities in its construction as well as demand for cement, steel and

other construction materials.

The North South-East West Corridor is the largest ongoing expressway project in India. It is the second phase of the National Highways Development

Project (NHDP), and consists of building 7,300 km of four/six lane expressways connecting Srinagar, Kanyakumari, Porbandar and Silchar. As of

September 2007, 20.37% of the entire work has been completed, with the final completion date set as February 28, 2009.

Brief on major infrastructural projects affecting logistics in India

1. Delhi Mumbai Industrial Corridor (DMIC)

Short listed industrial areas

Industrial infrastructure

Developing logistics facilities

Infrastructure forms a key parameter for development and operations of the industrial sector as well as for the logistics and warehousing. Therefore, we

have mentioned a few important infrastructural projects in the country, which will not just help in improving the connectivity across the length and

breadth of the country but will also act as a catalyst of increased logistics activities around them.

Background:

! 1,483 km long western Dedicated Freight Corridor (DFC) project between Delhi & Mumbai to be commissioned by 2012

! An MOU was signed between MoCI and METI, Japan in December, 2006 to create a framework for mutual cooperation for the project

! GOI initiated the DMIC to leverage the economic benefits arising from the western dedicated freight corridor

! GOI accorded 'in principle' approval to the DMIC Project Outline in August, 2007

! Meerut-Muzaffarnagar (Uttar Pradesh)

! Faridabad-Palwal (Haryana)

! Jaipur-Dausa (Rajasthan)

! Vadodara-Ankleshwar (Gujarat)

! Dighi Port (Maharashtra)

! Nimach-Nayagaon (Madhya Pradesh)

! New industrial clusters/ parks/ SEZs

! Upgradation of existing industrial estates/clusters

! Modern integrated agro-processing zones with allied infrastructure

! IT/ITES hubs and other allied infrastructure

! Efficient logistics chain with integrated multi-modal logistic hubs

Each common Investment Region/Industrial Area (IR/IA) will be provided with modern logistics infrastructure to serve containerised and

non-containerised cargo. The Integrated Multimodal Logistics Hubs will be situated at:

! Bawal and Palwal, Haryana

! Ajmer/Marwar, Rajasthan

! Palanpur in Gujarat

! Nashik, Pune in Maharashtra

! Dewas and Indore in Madhya Pradesh

! Envisaged port (Container, Ro-Ro, Bulk) terminals

! Bulk terminal, Ro-Ro facility at Dahej

! Break-Bulk terminal, Ro-Ro Facility at Maroli

! Container terminals at Hazira, Dighi ports

! State-of-the-Art Warehousing zones to be provided with inventory management and communication system integrating logistics components as well

as facilitating 3PL operators

DMIC route map

Map depicting Golden Quadrilateral and NSEW Corridor


NORTH-SOUTH CORRIDOR

EAST-WEST CORRIDOR

26 27

DURGAPUR

LUDHIANA

DADRI

KANPUR

MUGHAL SARAI

RAJASTHAN

MADHYA PRADESH

www.knightfrank.com


Key demand drivers for the logistics and warehousing sector

Higher economic growth

Improving infrastructure in the country

Expected increase in port capacity

Development of the railways network

Simplified tax regime

Increased consumption

! Increased Export-Import trade has grown at 20.17% CAGR in the last five years

! Ministry of commerce has targeted to increase India's share in global trade to 1.6% from existing 0.8% in the next five years

! NHAI has signed three BOT projects concession agreements at a cost of Rs.8.79 billion

! As per the 11th five year plan, infrastructure spending as a percentage of GDP is expected to increase from the existing 4.7% to 8% in the next

five years

! Developments of projects like Golden Quadrilateral, North-South and East-West highway

! Road transportation account for 65% of the freight traffic in India

! The existing sea port capacity of 737 million tonnes per year is expected to double by 2012

! Sea and airport development projects have been thrown open for private development by the government with intentions of carrying out larger

PPP projects

! Formation of SPV for execution of various projects

! Provision for creating strategic rail links to ports, improve hinterland connectivity and development of multi-modal transport corridors

! The Dedicated Freight Corridors (DFCs) are expected to have a total rail length of 2700 kms (Eastern and Western DFCs, together )

! Phasing out of the Central Sales Tax (CST) in the next three years (by 2010-11)

! Increased scope for value-added services in the warehousing and logistics sector

! Paving way for value-added taxation (VAT) becoming a central level tax leading to smoother logistics and distribution

! India's consumption rose 21.38% to Rs.468.93 billion. Fueled by a rising young, highly-educated, middle-class population, India's economic boom is

not expected to slow in the near future

! With India's personal consumption rates at a staggering 67% of GDP second only to the United States this middle-class spending on luxury goods is

creating a robust market

! The new mass merchant-style organised retailing, which today makes up about 5% of the overall market, is expected to grow to Rs.2557.79 billion

and increase the overall retail market by a CAGR of 21.8% by 2015

! The Index of Production of Consumer growth has grown by 62% in the past six years (2001-2007)

Organised Retailing Forecasted Sector Growth

Source: Logistics Management

Stationery

Footwear

Jewellery

Home Improvement

Food Services

Durables & Mobiles

Clothes & Fashion

Food & Grocery

0% 10% 20% 30% 40% 50%

20152004

Table 13: State wise attractiveness table for logistics/warehousing

According to Knight Frank Research, the states of Delhi, West Bengal and Maharashtra emerge as the most favourable destinations for growth of the

logistics and warehousing sector in India. The emergence of these states is a reflection on the presence of relatively organised markets as seen in the

cities of New Delhi, Kolkata and Mumbai. These states ranks high on its potential for reforms and proactive structure which shows that there is still

ample scope for growth for the logistics and warehousing sector within these markets, the presence of excellent port (sea/air) connectivity is also

expected to hasten this growth. The key factor which is expected to contribute to this growth is the steps the respective state government takes in

improving the quality of infrastructure and maintaining an investor friendly environment in their respective states. The rising inflation rates which is

taking a toll on the price of commodities and the market correction which is currently being witnessed by the country in all sectors are some of the

serious challenges which have to be overcome before further growth can be realised.

Statewise Sub parameters HR DL RJ UP WB GJ MH AP TN KN

attractiveness

parameters

Infrastructure Road M H H M M H H M H H

Connectivity

Power L H L L H H H M M M

Rail M H M H H M H M H H

Connectivity

Airport L H L M M M H H H H

Connectivity

Sea Port L L L L H H H H H M

Connectivity

Government Legislative impact M H M L H H M H M L

Policy and Reforms

Govt proactiveness L H M L H H M M M L

for the sector

Land cost H H M M H L H M H M

Proximity to Distance (km) from H H M M H M H M M M

established the closest city/estab.

market market

Key:

HR - Haryana DL - Delhi RJ - Rajasthan UP - Uttar Pradesh WB - West Bengal GJ - Gujarat MH - Maharashtra AP - Andhra Pradesh

TN - Tamil Nadu KN - Karnataka

H - High M - Medium L - Low

28 29


www.knightfrank.com


Key demand drivers for the logistics and warehousing sector

Higher economic growth

Improving infrastructure in the country

Expected increase in port capacity

Development of the railways network

Simplified tax regime

Increased consumption

! Increased Export-Import trade has grown at 20.17% CAGR in the last five years

! Ministry of commerce has targeted to increase India's share in global trade to 1.6% from existing 0.8% in the next five years

! NHAI has signed three BOT projects concession agreements at a cost of Rs.8.79 billion

! As per the 11th five year plan, infrastructure spending as a percentage of GDP is expected to increase from the existing 4.7% to 8% in the next

five years

! Developments of projects like Golden Quadrilateral, North-South and East-West highway

! Road transportation account for 65% of the freight traffic in India

! The existing sea port capacity of 737 million tonnes per year is expected to double by 2012

! Sea and airport development projects have been thrown open for private development by the government with intentions of carrying out larger

PPP projects

! Formation of SPV for execution of various projects

! Provision for creating strategic rail links to ports, improve hinterland connectivity and development of multi-modal transport corridors

! The Dedicated Freight Corridors (DFCs) are expected to have a total rail length of 2700 kms (Eastern and Western DFCs, together )

! Phasing out of the Central Sales Tax (CST) in the next three years (by 2010-11)

! Increased scope for value-added services in the warehousing and logistics sector

! Paving way for value-added taxation (VAT) becoming a central level tax leading to smoother logistics and distribution

! India's consumption rose 21.38% to Rs.468.93 billion. Fueled by a rising young, highly-educated, middle-class population, India's economic boom is

not expected to slow in the near future

! With India's personal consumption rates at a staggering 67% of GDP second only to the United States this middle-class spending on luxury goods is

creating a robust market

! The new mass merchant-style organised retailing, which today makes up about 5% of the overall market, is expected to grow to Rs.2557.79 billion

and increase the overall retail market by a CAGR of 21.8% by 2015

! The Index of Production of Consumer growth has grown by 62% in the past six years (2001-2007)

Organised Retailing Forecasted Sector Growth

Source: Logistics Management

Stationery

Footwear

Jewellery

Home Improvement

Food Services

Durables & Mobiles

Clothes & Fashion

Food & Grocery

0% 10% 20% 30% 40% 50%

20152004

Table 13: State wise attractiveness table for logistics/warehousing

According to Knight Frank Research, the states of Delhi, West Bengal and Maharashtra emerge as the most favourable destinations for growth of the

logistics and warehousing sector in India. The emergence of these states is a reflection on the presence of relatively organised markets as seen in the

cities of New Delhi, Kolkata and Mumbai. These states ranks high on its potential for reforms and proactive structure which shows that there is still

ample scope for growth for the logistics and warehousing sector within these markets, the presence of excellent port (sea/air) connectivity is also

expected to hasten this growth. The key factor which is expected to contribute to this growth is the steps the respective state government takes in

improving the quality of infrastructure and maintaining an investor friendly environment in their respective states. The rising inflation rates which is

taking a toll on the price of commodities and the market correction which is currently being witnessed by the country in all sectors are some of the

serious challenges which have to be overcome before further growth can be realised.

Statewise Sub parameters HR DL RJ UP WB GJ MH AP TN KN

attractiveness

parameters

Infrastructure Road M H H M M H H M H H

Connectivity

Power L H L L H H H M M M

Rail M H M H H M H M H H

Connectivity

Airport L H L M M M H H H H

Connectivity

Sea Port L L L L H H H H H M

Connectivity

Government Legislative impact M H M L H H M H M L

Policy and Reforms

Govt proactiveness L H M L H H M M M L

for the sector

Land cost H H M M H L H M H M

Proximity to Distance (km) from H H M M H M H M M M

established the closest city/estab.

market market

Key:

HR - Haryana DL - Delhi RJ - Rajasthan UP - Uttar Pradesh WB - West Bengal GJ - Gujarat MH - Maharashtra AP - Andhra Pradesh

TN - Tamil Nadu KN - Karnataka

H - High M - Medium L - Low

28 29


www.knightfrank.com


Case Study: Transport Corporation of India (TCI)

Company Background

Fact file

TCI Group with its 49 years of experience and a turnover of over Rs.12 billion is India's integrated supply chain and logistics solutions provider with a

complete range of services.

With its customer-centric approach, world class resources, State-of-Art technology and professional management, the group follows strong corporate

governance and is committed to value creation for its stakeholders and social responsibilities.

! TCI has 15% market share of the organised logistics industry

! Extensive network of over 1,100 company-owned offices

! Over 5,700 employees

! Operates in six business segments

Transportation

Express (Courier)

Supply chain solutions (SCS)

Coastal shipping

Windmills

Trading (fuel stations)

! Owns a fleet of over 3,000 trucks and 5 cargo ships

! Operates approximately 7000 trucks on a daily basis

! It owns about 15% of it while the rest are leased

! 6.5 mn.sq.ft. of state-of-the-art warehousing space

! Total installed windmill power generation capacity of 11.5 MW

! The group moves goods valued at more than 1.5% of India's GDP

! XPS, the courier services arm of TCI is amongst the top three express distributors in India

The company forayed into 3PL solutions by forming a 49:51 Joint Venture (JV) with Mitsui & Co in 1999. The JV provides complete logistics solutions, to

Toyota Kirloskar Motors India. TCI is the first road transport organisation in the country to achieve ISO 9001:2000 certification in service quality for its

operations.

TCI's business segments

Supply Chain Management

LogisticsRoad/Rail/Sea/Air

Warehousing

Clearing & Forwarding

Co

uri

er

& C

arg

o

FT

L &

LT

L

Co

ld C

hain

s

OD

C

DC

’s

Cro

ss D

eck

s

Bo

nd

ed

FTL Full Truck Load LTL- Less than truck load DC Distribution Centre ODC Over dimensional cargo/Hazardous

Revamping of the revenue mix will consequently result to a change in contribution to Earnings Before Interest, Taxes, Depreciation and Amortisation

(EBITDA) from each segment. The SCS and XPS divisions with high EBITDA margins will contribute over 55% to EBITDA, while the transportation

business will see its contribution decline to 21% from the existing 26% levels.

Out of the various business segments of TCI, transport division has been the key contributor to the revenue. However, the company has realised that

the EBITDA margins are not very high in this segment. Verticals like supply chain and express courier services has comparable EBITDA margins and thus

the company has been in the process of increasing their share in the overall business model. The target for contribution from the transport division is

expected to further reduce and stabilize at 40%. The EBITDA contribution from this business is expected to decline to 21% in 2009 from today's 26%.

Business Model Transformation (2007-09)

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

FY07 FY08e FY09e

Transport Express Supply Chain TCI Seaways division Power division

Percentage contribution to EBITDA

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

FY07 FY08e FY09e

8%

19%

23%

27%

24%

8%

17%

20%

28%

26%

7%

20%

26%

26%

21%


The share of the Supply Chain Solutions (SCS) segment is expected to increase from 13% in FY07 to 19% in FY09. The company being transformed

from a transport company to an integrated logistics service provider, the share of the transport segment is expected to be brought down to 50% in

FY09 from 52% in FY07. This segment still remains the maximum contributor to the revenue generation of the company. The express cargo segment is

expected to form approximately 25% of the company portfolio over the next two years.

Source: ICICI Direct Research



www.knightfrank.com


Case Study: Transport Corporation of India (TCI)

Company Background

Fact file

TCI Group with its 49 years of experience and a turnover of over Rs.12 billion is India's integrated supply chain and logistics solutions provider with a

complete range of services.

With its customer-centric approach, world class resources, State-of-Art technology and professional management, the group follows strong corporate

governance and is committed to value creation for its stakeholders and social responsibilities.

! TCI has 15% market share of the organised logistics industry

! Extensive network of over 1,100 company-owned offices

! Over 5,700 employees

! Operates in six business segments

Transportation

Express (Courier)

Supply chain solutions (SCS)

Coastal shipping

Windmills

Trading (fuel stations)

! Owns a fleet of over 3,000 trucks and 5 cargo ships

! Operates approximately 7000 trucks on a daily basis

! It owns about 15% of it while the rest are leased

! 6.5 mn.sq.ft. of state-of-the-art warehousing space

! Total installed windmill power generation capacity of 11.5 MW

! The group moves goods valued at more than 1.5% of India's GDP

! XPS, the courier services arm of TCI is amongst the top three express distributors in India

The company forayed into 3PL solutions by forming a 49:51 Joint Venture (JV) with Mitsui & Co in 1999. The JV provides complete logistics solutions, to

Toyota Kirloskar Motors India. TCI is the first road transport organisation in the country to achieve ISO 9001:2000 certification in service quality for its

operations.

TCI's business segments

Supply Chain Management

LogisticsRoad/Rail/Sea/Air

Warehousing

Clearing & Forwarding

Co

uri

er

& C

arg

o

FT

L &

LT

L

Co

ld C

hain

s

OD

C

DC

’s

Cro

ss D

eck

s

Bo

nd

ed

FTL Full Truck Load LTL- Less than truck load DC Distribution Centre ODC Over dimensional cargo/Hazardous

Revamping of the revenue mix will consequently result to a change in contribution to Earnings Before Interest, Taxes, Depreciation and Amortisation

(EBITDA) from each segment. The SCS and XPS divisions with high EBITDA margins will contribute over 55% to EBITDA, while the transportation

business will see its contribution decline to 21% from the existing 26% levels.

Out of the various business segments of TCI, transport division has been the key contributor to the revenue. However, the company has realised that

the EBITDA margins are not very high in this segment. Verticals like supply chain and express courier services has comparable EBITDA margins and thus

the company has been in the process of increasing their share in the overall business model. The target for contribution from the transport division is

expected to further reduce and stabilize at 40%. The EBITDA contribution from this business is expected to decline to 21% in 2009 from today's 26%.

Business Model Transformation (2007-09)

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

FY07 FY08e FY09e


Percentage contribution to EBITDA

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

FY07 FY08e FY09e

8%

19%

23%

27%

24%

8%

17%

20%

28%

26%

7%

20%

26%

26%

21%


The share of the Supply Chain Solutions (SCS) segment is expected to increase from 13% in FY07 to 19% in FY09. The company being transformed

from a transport company to an integrated logistics service provider, the share of the transport segment is expected to be brought down to 50% in

FY09 from 52% in FY07. This segment still remains the maximum contributor to the revenue generation of the company. The express cargo segment is

expected to form approximately 25% of the company portfolio over the next two years.




www.knightfrank.com


The demand for logistics is the maximum from the auto sector for the company. This is followed by Fast moving consumer goods (FMCG), Telecom,

Pharma and chemicals.

FY06 FY07 FY08e FY09e

Rs

Cro

res

140

120

100

80

60

40

20

0

10%

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%

Perc

en

tag

e (

%)

EBITDA margins Operating profit margins

Annual growth in operating profits

The contribution of SCS and XPS to EBITDA is expected to increase from 48% in 2007 to 52% in 2009.

Since the company has identified a huge supply demand gap in the number of players providing value added end-to-end logistics services, it plans to

go ahead with its plans to increase the share of SCS and XPS in its business portfolio.

Table 14: List of key clients

Auto FMCG Telecom Pharma Chemicals

Toyota HLL Nokia Dr Reddys MCC PTA

Bajaj P&G Reliance Sunil Health Indo Rama

Maruti Nestle Motorola Bharti Health PRAXAIR

Tata Cadbury Ericson

Mahindra & Mahindra Amul Tata Tele

Sonalika Office One

TVS CCD

JCB

TCI Supply Chain Solutions: the real estate aspect

TCI has around 220 properties across the country, which is currently being used as branch offices or warehouses. With most cities expanding due to

increasing urbanisation, some of these properties, which were earlier situated on the outskirts of cities, are now within city limits.

The company invested approximately Rs.220 million in land banks in FY07. However, the amount of capital expenditure proposed for FY08 is expected

to be around Rs.1.10 billion. A total of Rs.1.30 billion is expected to be invested into warehousing land till the year 2010.

The company has decided to move its logistics activities out of the cities and commercially develop the existing land. Initially the company plans to

develop four properties with a total area of 12.54 acres over FY08-12. These properties are located in Delhi, Bengaluru, Dehradun and Ahmedabad. The

company plans to come up with residential developments in Bengaluru and Ahmedabad. While, the properties in Delhi and Dehradun have commercial

development proposed.

Outlook

Industrial

SEZ


The current growth of the industrial sector can be primarily attributed to the economic growth in the sector. Though there has been a temporary dip in

the industrial growth, the growth momentum is expected to be sustained in the long run. The recovery time of the industrial sector in the current

scenario is expected to be of strategic importance. From the analysis of the past years' data, it can be inferred that Indian industry have followed a

uniform cyclic pattern, lasting for three years. The Indian industrial GDP data (at constant prices) from 1970-71 to 2002-03 shows that upswings for the

last three years is on the downslide and strategically, it implies that the Indian industry has to take into account this cyclic behavior in sales planning,

sales forecasts, pricing and capacity expansion. The factors which are known to hinder industrial growth are:

! Reservation for small scale sector

! High customs tariffs

! Rigidities in labour law acting as impediments to building large firms and reaping the economies of scale and scope

! Frictions faced in the creation and closure of firms in response to normal competitive market dynamics

! Lack of clarity in the structure of indirect taxes affecting resource allocation

! Surge in global oil price

! Increasing inflation

! Cheaper goods from China

The developed countries have been able to resolve the issue of cyclic behaviour through strong fiscal management and a growing preference towards

the services sector. The upswing in the Indian industrial scenario can also be sustained by emphasis on fiscal management by the State and aggressive

pursue of reforms related to trade, labour and overall economy.

Special economic zones are avenues for growth which promote urbanisation and privatisation in the country. This growth needs to trickle down to the

local economies in order to attain higher growth rate while removing regional gaps. Government of India is evaluating the concept of Investment

Regions, modelled on Pudong, Rotterdam and other successful ventures across the world. To get the maximum possible benefit from the proposed

investment in infrastructure, the Government of India has proposed to come up with a plan for setting up 5 or 6 such regions in India. The proposal,

currently under debate, plans for a single mega industry-led cluster that will have a planned network of high quality roads, air and sea ports and power

plants connecting every industry and development area in a geographical area of 250-300 sq.km. It has also been proposed to include the existing SEZs

in such Investment Regions. In order to attain balance in revenues from growth of SEZs and land pool, holistic approach for development of SEZs is

required, where case to case handling of SEZ should be based on nature, potential and location of SEZ in the macro zone.

Another factor which should be taken into account is the procedure related to land acquisition, as the development of SEZs is giving rise to

controversies, particularly among landless agricultural labourers who fear loss of livelihood and expect little by way of compensation. This has slowed, if

not discouraged, the private sector developing the SEZs and has also affected FDI flows into the SEZs. The challenge, therefore, is to simultaneously

boost agricultural productivity, while creating enough manufacturing and other alternate employment opportunities for the non-agricultural sector.

The basic difference between the Chinese and the Indian model of SEZs lies in their structure. In China, SEZs are predominantly manufacturing

industries-based, whereas in India we have service sector based SEZs as well. Currently, in China, over 20% of the FDI flows into SEZ which generate

10% of exports. The basic factor for success of SEZ in China is their investor-friendly policies. The Chinese Model includes: unique location, large size,

attractive incentive packages, liberal customs procedures, flexible labour laws, strong domestic market, and allows local governments to administer the

SEZs. The establishment of the SEZs has undoubtedly helped to increase the volume of international trade and will continue to do so. Further, a large

amount of foreign investment has found its way not only into the export trade, but also into infrastructure construction and commerce. Foreign

companies have been encouraged to establish their presence in the territories and the export industry has grown. Advanced foreign technology has

been brought in with the inflow of foreign investment.

In 2005, the Indian logistics market was worth an estimated Rs.660.3 billion. The transportation logistics function contributed towards the largest share

of the market followed by warehousing. The logistics market in India is fragmented predominantly due to the large presence of the unorganised service

providers. Logistics, which should be considered to be one of the lifelines of a country the size of India, has so far been treated as a secondary activity.

The industry broadly consists of freight consolidators, transporters, warehousing specialists, and organised 3PL solutions providers; in the increasing

order of value addition to the service.

Warehousing in India has been considered as a storage function, and as with the logistics function, most companies treat it as a secondary activity,

neglecting the complexity of the operations involved and the cost benefits that can be derived. This segment also forms a significantly large portion of

the entire market, as multiple warehousing is a very important cost saving requirement in the Indian scenario.



www.knightfrank.com


The demand for logistics is the maximum from the auto sector for the company. This is followed by Fast moving consumer goods (FMCG), Telecom,

Pharma and chemicals.

FY06 FY07 FY08e FY09e

Rs

Cro

res

140

120

100

80

60

40

20

0

10%

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%

Perc

en

tag

e (

%)

EBITDA margins Operating profit margins

Annual growth in operating profits

The contribution of SCS and XPS to EBITDA is expected to increase from 48% in 2007 to 52% in 2009.

Since the company has identified a huge supply demand gap in the number of players providing value added end-to-end logistics services, it plans to

go ahead with its plans to increase the share of SCS and XPS in its business portfolio.

Table 14: List of key clients

Auto FMCG Telecom Pharma Chemicals

Toyota HLL Nokia Dr Reddys MCC PTA

Bajaj P&G Reliance Sunil Health Indo Rama

Maruti Nestle Motorola Bharti Health PRAXAIR

Tata Cadbury Ericson

Mahindra & Mahindra Amul Tata Tele

Sonalika Office One

TVS CCD

JCB

TCI Supply Chain Solutions: the real estate aspect

TCI has around 220 properties across the country, which is currently being used as branch offices or warehouses. With most cities expanding due to

increasing urbanisation, some of these properties, which were earlier situated on the outskirts of cities, are now within city limits.

The company invested approximately Rs.220 million in land banks in FY07. However, the amount of capital expenditure proposed for FY08 is expected

to be around Rs.1.10 billion. A total of Rs.1.30 billion is expected to be invested into warehousing land till the year 2010.

The company has decided to move its logistics activities out of the cities and commercially develop the existing land. Initially the company plans to

develop four properties with a total area of 12.54 acres over FY08-12. These properties are located in Delhi, Bengaluru, Dehradun and Ahmedabad. The

company plans to come up with residential developments in Bengaluru and Ahmedabad. While, the properties in Delhi and Dehradun have commercial

development proposed.

Outlook

Industrial

SEZ


The current growth of the industrial sector can be primarily attributed to the economic growth in the sector. Though there has been a temporary dip in

the industrial growth, the growth momentum is expected to be sustained in the long run. The recovery time of the industrial sector in the current

scenario is expected to be of strategic importance. From the analysis of the past years' data, it can be inferred that Indian industry have followed a

uniform cyclic pattern, lasting for three years. The Indian industrial GDP data (at constant prices) from 1970-71 to 2002-03 shows that upswings for the

last three years is on the downslide and strategically, it implies that the Indian industry has to take into account this cyclic behavior in sales planning,

sales forecasts, pricing and capacity expansion. The factors which are known to hinder industrial growth are:

! Reservation for small scale sector

! High customs tariffs

! Rigidities in labour law acting as impediments to building large firms and reaping the economies of scale and scope

! Frictions faced in the creation and closure of firms in response to normal competitive market dynamics

! Lack of clarity in the structure of indirect taxes affecting resource allocation

! Surge in global oil price

! Increasing inflation

! Cheaper goods from China

The developed countries have been able to resolve the issue of cyclic behaviour through strong fiscal management and a growing preference towards

the services sector. The upswing in the Indian industrial scenario can also be sustained by emphasis on fiscal management by the State and aggressive

pursue of reforms related to trade, labour and overall economy.

Special economic zones are avenues for growth which promote urbanisation and privatisation in the country. This growth needs to trickle down to the

local economies in order to attain higher growth rate while removing regional gaps. Government of India is evaluating the concept of Investment

Regions, modelled on Pudong, Rotterdam and other successful ventures across the world. To get the maximum possible benefit from the proposed

investment in infrastructure, the Government of India has proposed to come up with a plan for setting up 5 or 6 such regions in India. The proposal,

currently under debate, plans for a single mega industry-led cluster that will have a planned network of high quality roads, air and sea ports and power

plants connecting every industry and development area in a geographical area of 250-300 sq.km. It has also been proposed to include the existing SEZs

in such Investment Regions. In order to attain balance in revenues from growth of SEZs and land pool, holistic approach for development of SEZs is

required, where case to case handling of SEZ should be based on nature, potential and location of SEZ in the macro zone.

Another factor which should be taken into account is the procedure related to land acquisition, as the development of SEZs is giving rise to

controversies, particularly among landless agricultural labourers who fear loss of livelihood and expect little by way of compensation. This has slowed, if

not discouraged, the private sector developing the SEZs and has also affected FDI flows into the SEZs. The challenge, therefore, is to simultaneously

boost agricultural productivity, while creating enough manufacturing and other alternate employment opportunities for the non-agricultural sector.

The basic difference between the Chinese and the Indian model of SEZs lies in their structure. In China, SEZs are predominantly manufacturing

industries-based, whereas in India we have service sector based SEZs as well. Currently, in China, over 20% of the FDI flows into SEZ which generate

10% of exports. The basic factor for success of SEZ in China is their investor-friendly policies. The Chinese Model includes: unique location, large size,

attractive incentive packages, liberal customs procedures, flexible labour laws, strong domestic market, and allows local governments to administer the

SEZs. The establishment of the SEZs has undoubtedly helped to increase the volume of international trade and will continue to do so. Further, a large

amount of foreign investment has found its way not only into the export trade, but also into infrastructure construction and commerce. Foreign

companies have been encouraged to establish their presence in the territories and the export industry has grown. Advanced foreign technology has

been brought in with the inflow of foreign investment.

In 2005, the Indian logistics market was worth an estimated Rs.660.3 billion. The transportation logistics function contributed towards the largest share

of the market followed by warehousing. The logistics market in India is fragmented predominantly due to the large presence of the unorganised service

providers. Logistics, which should be considered to be one of the lifelines of a country the size of India, has so far been treated as a secondary activity.

The industry broadly consists of freight consolidators, transporters, warehousing specialists, and organised 3PL solutions providers; in the increasing

order of value addition to the service.

Warehousing in India has been considered as a storage function, and as with the logistics function, most companies treat it as a secondary activity,

neglecting the complexity of the operations involved and the cost benefits that can be derived. This segment also forms a significantly large portion of

the entire market, as multiple warehousing is a very important cost saving requirement in the Indian scenario.



www.knightfrank.com


35

Currently, warehouse management in India follows more of a Clearing and Forwarding (C&F) agent model. Most of the warehouses are in the form of

depots or stocking points managed by agents for companies on a contractual basis and are not managed very professionally. Most of these C&F depots

are used by companies to facilitate transfer of goods between stock points. Concepts such as automation, vertical space utilisation, and the use of

warehouse management systems were quite unheard of. However, these are slowly but steadily gaining prominence.

The 3PL service providers assume end-to-end responsibility to manage a part or the company's entire supply chain. The growth of 3PL service providers

in India has introduced the use of global supply chain management standards in the country. However, the 3PL service providers form a miniscule part

of the entire market, comprising around 3% of the Indian logistics.

Roads carry the bulk of the freight in India. The roads in India have a history of being unsafe and in very bad conditions. This is changing with the

construction of the Golden Quadrilateral and North-South-East-West (NSEW) highway networks, traversing the entire country. The highway

infrastructure is highly strained, as it comprises only around 1.4% of the total road network in India but carries in excess of 50% of the country's total

freight. Even though rail freight is more cost effective in terms of cost per unit distance and per unit weight, the efficiency of the rail freight system in

India has for long been low and it has also been considered as a secondary freight mode. Previously, rail was the most preferred mode of freight;

however, bad pricing and inflexibility have resulted in the railways experiencing a downturn. With the Indian government announcing plans to open up

the containerised rail freight sector to private operators this is expected to change. Companies such as APL Logistics, Maersk Logistics, Gateway District

Parks, Central Warehousing Corporation, JM Baxi group, Adani Logistics, and Reliance Logistics are expected to enter into this segment. The barriers to

enter this segment are rather low. Companies need to have a minimum turnover of around Rs.1 billion in India. To get a permit license for 20 years they

need to pay the government between Rs.42.6 million and Rs.426 million, depending on whether they want to operate on a specific route or an all India

basis. Rail freight comprises around 670 million tones, which is around 33% of the total domestic traffic in India. Companies in the metals, heavy

machinery, and engineering and cement sectors are expected to benefit from the opening up of the railways to private participants as these carry bulky

cargo over long distances. Previously, costs of trucking were very high as the final destination could be in a remote corner of the country, where a

back-haul arrangement would be nearly impossible. In sectors such as these, the cost of entire logistics spending was as high as 75%. Long distance

transportation by rail can help cut costs in these sectors. With the railways department mulling a separate freight corridor, this sector is likely to

experience a positive trend. This is keeping in mind that passenger trains get higher priority over goods trains and the new corridor can run parallel to

existing lines to places of heavy activity such as ports.

Strengths Weaknesses

Increasing per capita income High logistics cost as a % of GDP (13 -4%)

High GDP growth Lack of use of technology in the sector

Land availability Lack of effective warehousing management systems

Rising Industrial Production High risk involved in fleet movement

Availability of manpower Low quality of existing infrastructure

Large coastline Lack of skilled labour

Good port connectivity Absence of established regulatory framework for the sector

Lower profit margins in comparison with other development options

Opportunities Challenges

Market at nascent stage Expected lower acceptance for organised logistics services

Increase in container traffic movement at Indian ports Delay in implementation of ports' capacity expansion projects

Provision for increased PPP in the sector Geographical size and diversity of the country

Phasing out of the Central Sales Tax (CST) Security concerns

Setting up of Free Trade Warehousing Zones (FTWZs)

Dedicated Freight Corridors (DFCs)

Increased retail demand

Lack of temperature controlled warehouses (cold storages)

Increased trade activity

Growth potential of express transport

Inclination towards outsourcing services to specialists

Proposed Air Cargo Complexes across the country

Table 15: SWOC of logistics and warehousing sector in India

The large unorganised segment of the logistics industry in India poses a tough competition to the companies in the organised one. The unorganised

segment service providers have lesser overhead costs and are hence in a position to provide extremely competitive rates. This is expected to have a

considerably large impact in the future, posing a challenge especially to the 3PL service providers. Besides, since entry barriers are also low, there is the

possibility of intensified competition even in the organised sector. Complex tax laws and infrastructure bottlenecks are also issues to be dealt with.

The growth of the Indian economy, especially the rise in the manufacturing sector is one of the key growth drivers of the logistics industry in India.

Apart from this, initiatives by the Government to remove bottlenecks in the logistics infrastructure are also drivers for growth in the sector that is

expected to grow at a CAGR of 6.5% from 2005 to 2012.

The comparative analysis has been carried out in order to understand the growth potential of the logistics and warehousing segment in various

developing economies. The countries have been rated on two basic parameters of logistics and warehousing potential and economic growth potential.

The analysis is of a qualitative nature and the countries considered are Brazil, Russia, India, China, Thailand, Singapore, Malaysia and Indonesia on a

High-Low format.

Comparative analysis of developing economies

Source: CIA World Factbook, United Nations Industrial Development Organization, IMD International

Logistics and Warehousing potential

Economic growth potential

! Overall connectivity: The points for this parameter have been allotted by considering the spread of airports, waterways and highways in each

country

! Apparent consumption: It is defined as the output plus imports less exports. It is thus the right measure to gauge the internal consumption or the

demand existing in the country.

! Infrastructure initiatives: The points have been awarded on the basis of the infrastructure index

! Industrial production growth rate (IGPR): This entry gives the annual percentage increase in industrial production (includes manufacturing, mining,

and construction)

! Economy: The points for this sub-parameter have been awarded on the basis of Gross domestic product (GDP) of each country

! Volume of international trade: Import and export volumes for each country

! Political risk index: The points have been awarded on the basis of the Global political risk index (GPRI) which takes into account factors like

government, society, security and the economy

! Consumer price inflation (CPI): The points for this parameter have been awarded on the basis of the percentage change in the index (negative scale)

China

India

RussiaBrazil

Malaysia

Singapore

Thailand

Indonesia

Economic Growth Potential

High

High

LowLo

gis

tics

& W

are

ho

usi

ng

po

ten

tial

www.knightfrank.com


35

Currently, warehouse management in India follows more of a Clearing and Forwarding (C&F) agent model. Most of the warehouses are in the form of

depots or stocking points managed by agents for companies on a contractual basis and are not managed very professionally. Most of these C&F depots

are used by companies to facilitate transfer of goods between stock points. Concepts such as automation, vertical space utilisation, and the use of

warehouse management systems were quite unheard of. However, these are slowly but steadily gaining prominence.

The 3PL service providers assume end-to-end responsibility to manage a part or the company's entire supply chain. The growth of 3PL service providers

in India has introduced the use of global supply chain management standards in the country. However, the 3PL service providers form a miniscule part

of the entire market, comprising around 3% of the Indian logistics.

Roads carry the bulk of the freight in India. The roads in India have a history of being unsafe and in very bad conditions. This is changing with the

construction of the Golden Quadrilateral and North-South-East-West (NSEW) highway networks, traversing the entire country. The highway

infrastructure is highly strained, as it comprises only around 1.4% of the total road network in India but carries in excess of 50% of the country's total

freight. Even though rail freight is more cost effective in terms of cost per unit distance and per unit weight, the efficiency of the rail freight system in

India has for long been low and it has also been considered as a secondary freight mode. Previously, rail was the most preferred mode of freight;

however, bad pricing and inflexibility have resulted in the railways experiencing a downturn. With the Indian government announcing plans to open up

the containerised rail freight sector to private operators this is expected to change. Companies such as APL Logistics, Maersk Logistics, Gateway District

Parks, Central Warehousing Corporation, JM Baxi group, Adani Logistics, and Reliance Logistics are expected to enter into this segment. The barriers to

enter this segment are rather low. Companies need to have a minimum turnover of around Rs.1 billion in India. To get a permit license for 20 years they

need to pay the government between Rs.42.6 million and Rs.426 million, depending on whether they want to operate on a specific route or an all India

basis. Rail freight comprises around 670 million tones, which is around 33% of the total domestic traffic in India. Companies in the metals, heavy

machinery, and engineering and cement sectors are expected to benefit from the opening up of the railways to private participants as these carry bulky

cargo over long distances. Previously, costs of trucking were very high as the final destination could be in a remote corner of the country, where a

back-haul arrangement would be nearly impossible. In sectors such as these, the cost of entire logistics spending was as high as 75%. Long distance

transportation by rail can help cut costs in these sectors. With the railways department mulling a separate freight corridor, this sector is likely to

experience a positive trend. This is keeping in mind that passenger trains get higher priority over goods trains and the new corridor can run parallel to

existing lines to places of heavy activity such as ports.

Strengths Weaknesses

Increasing per capita income High logistics cost as a % of GDP (13 -4%)

High GDP growth Lack of use of technology in the sector

Land availability Lack of effective warehousing management systems

Rising Industrial Production High risk involved in fleet movement

Availability of manpower Low quality of existing infrastructure

Large coastline Lack of skilled labour

Good port connectivity Absence of established regulatory framework for the sector

Lower profit margins in comparison with other development options

Opportunities Challenges

Market at nascent stage Expected lower acceptance for organised logistics services

Increase in container traffic movement at Indian ports Delay in implementation of ports' capacity expansion projects

Provision for increased PPP in the sector Geographical size and diversity of the country

Phasing out of the Central Sales Tax (CST) Security concerns

Setting up of Free Trade Warehousing Zones (FTWZs)

Dedicated Freight Corridors (DFCs)

Increased retail demand

Lack of temperature controlled warehouses (cold storages)

Increased trade activity

Growth potential of express transport

Inclination towards outsourcing services to specialists

Proposed Air Cargo Complexes across the country

Table 15: SWOC of logistics and warehousing sector in India

The large unorganised segment of the logistics industry in India poses a tough competition to the companies in the organised one. The unorganised

segment service providers have lesser overhead costs and are hence in a position to provide extremely competitive rates. This is expected to have a

considerably large impact in the future, posing a challenge especially to the 3PL service providers. Besides, since entry barriers are also low, there is the

possibility of intensified competition even in the organised sector. Complex tax laws and infrastructure bottlenecks are also issues to be dealt with.

The growth of the Indian economy, especially the rise in the manufacturing sector is one of the key growth drivers of the logistics industry in India.

Apart from this, initiatives by the Government to remove bottlenecks in the logistics infrastructure are also drivers for growth in the sector that is

expected to grow at a CAGR of 6.5% from 2005 to 2012.

The comparative analysis has been carried out in order to understand the growth potential of the logistics and warehousing segment in various

developing economies. The countries have been rated on two basic parameters of logistics and warehousing potential and economic growth potential.

The analysis is of a qualitative nature and the countries considered are Brazil, Russia, India, China, Thailand, Singapore, Malaysia and Indonesia on a

High-Low format.

Comparative analysis of developing economies

Source: CIA World Factbook, United Nations Industrial Development Organization, IMD International

Logistics and Warehousing potential

Economic growth potential

! Overall connectivity: The points for this parameter have been allotted by considering the spread of airports, waterways and highways in each

country

! Apparent consumption: It is defined as the output plus imports less exports. It is thus the right measure to gauge the internal consumption or the

demand existing in the country.

! Infrastructure initiatives: The points have been awarded on the basis of the infrastructure index

! Industrial production growth rate (IGPR): This entry gives the annual percentage increase in industrial production (includes manufacturing, mining,

and construction)

! Economy: The points for this sub-parameter have been awarded on the basis of Gross domestic product (GDP) of each country

! Volume of international trade: Import and export volumes for each country

! Political risk index: The points have been awarded on the basis of the Global political risk index (GPRI) which takes into account factors like

government, society, security and the economy

! Consumer price inflation (CPI): The points for this parameter have been awarded on the basis of the percentage change in the index (negative scale)

China

India

RussiaBrazil

Malaysia

Singapore

Thailand

Indonesia

Economic Growth Potential

High

High

LowLo

gis

tics

& W

are

ho

usi

ng

po

ten

tial

www.knightfrank.com


According to Knight Frank Research, the developing economies can be ranked as below in terms of Logistics and Warehousing potential vis-à-vis the

economic growth:

India and China get the maximum ranking for apparent consumption indicating increasing expenditure patterns. These two countries also have large

population base and thus the demand is expected to sustain for these two developing economies.

At present China has better infrastructure in terms of the port capacity and turn-around times. The concept of SEZs is also much more common in

China. With the number of SEZs proposed to come up in India, the supporting infrastructure for the sector is expected to improve siginificantly leading

to reduction in turn-around time. This is expected to further lead to reduction in logistics cost as a percentage of the GDP.

Source: CIA World Factbook, Eurasia Group (political & economic risk analysis firm), United Nations Department of Economic and Social Affairs

Parameter Highest Ranked Country Ranking for India

Economy China 3

Volumes of International Trade China 4

Political Risk Index China 2

Consumer Price Inflation (% change) Singapore 4

Connectivity India 1

Apparent Consumption China 2

Infrastructure Initiatives Singapore 4

Industrial production growth rate China 3

! India gets ranked the highest in terms of extent of connectivity within the country. This factor is expected to boost the scope for further

strengthening of the infrastructure requirements of the logistics sector

! Volumes of international trade are very low in the country vis-à-vis the other developing economies. The long turn-around times at our ports are also

impeding the growth in international trade. With increasing demand for goods in the country, India is expected to perform better on this parameter.

! India ranked low for infrastructure initiatives, there are concerns regarding the commissioning of various infrastructure projects under construction in

the country.

! With increased economic activity, India has also seen huge increase in consumer price inflation over the years. This is a major deterrent to the rise in

demand in the country.

! The country is ranked high on apparent consumption.

Country Rank

China 1

India 2

Russia 4

Brazil 3

Malaysia 6

Singapore 5

Thailand 7

Indonesia 8

Table 16: Ranking based on logistics potential

Table 17: Comparison of India with other developing economies

Volumesof internationaltrade

India

Economy

Connectivity

Apparent consumption

Index of Industrial Production

ConsumerPrice

Inflation(% change)

Turn around timesand efficiencyat Indian ports

Infrastructureinitiatives

India lags behind in terms of turn-aroundtimes at its ports. This being the majorfactor for lower EXIM trade in spite of veryhigh demand.

Parameters affecting logistics in India



www.knightfrank.com


According to Knight Frank Research, the developing economies can be ranked as below in terms of Logistics and Warehousing potential vis-à-vis the

economic growth:

India and China get the maximum ranking for apparent consumption indicating increasing expenditure patterns. These two countries also have large

population base and thus the demand is expected to sustain for these two developing economies.

At present China has better infrastructure in terms of the port capacity and turn-around times. The concept of SEZs is also much more common in

China. With the number of SEZs proposed to come up in India, the supporting infrastructure for the sector is expected to improve siginificantly leading

to reduction in turn-around time. This is expected to further lead to reduction in logistics cost as a percentage of the GDP.

Source: CIA World Factbook, Eurasia Group (political & economic risk analysis firm), United Nations Department of Economic and Social Affairs

Parameter Highest Ranked Country Ranking for India

Economy China 3

Volumes of International Trade China 4

Political Risk Index China 2

Consumer Price Inflation (% change) Singapore 4

Connectivity India 1

Apparent Consumption China 2

Infrastructure Initiatives Singapore 4

Industrial production growth rate China 3

! India gets ranked the highest in terms of extent of connectivity within the country. This factor is expected to boost the scope for further

strengthening of the infrastructure requirements of the logistics sector

! Volumes of international trade are very low in the country vis-à-vis the other developing economies. The long turn-around times at our ports are also

impeding the growth in international trade. With increasing demand for goods in the country, India is expected to perform better on this parameter.

! India ranked low for infrastructure initiatives, there are concerns regarding the commissioning of various infrastructure projects under construction in

the country.

! With increased economic activity, India has also seen huge increase in consumer price inflation over the years. This is a major deterrent to the rise in

demand in the country.

! The country is ranked high on apparent consumption.

Country Rank

China 1

India 2

Russia 4

Brazil 3

Malaysia 6

Singapore 5

Thailand 7

Indonesia 8

Table 16: Ranking based on logistics potential

Table 17: Comparison of India with other developing economies

Volumesof internationaltrade

India

Economy

Connectivity

Apparent consumption

Index of Industrial Production

ConsumerPrice

Inflation(% change)

Turn around timesand efficiencyat Indian ports

Infrastructureinitiatives

India lags behind in terms of turn-aroundtimes at its ports. This being the majorfactor for lower EXIM trade in spite of veryhigh demand.

Parameters affecting logistics in India



www.knightfrank.com


Glossary! 3PL: Third Party Logistics

! GDP: Gross Domestic Product

! PPP: Public Private Partnership

! FDI: Foreign Direct Investment

! CAGR: Compound Annual Growth Rate

! TEU: Twenty feet Equivalent Units

! GSDP: Gross State Domestic Product

! NSDP: Net State Domestic Product

! RIICO: Rajasthan State Industrial Development & Investment Corporation Ltd.

! ICD: Inland Container Depot

! KMP: Kundli Manesar Palwal Expressway


! SPV: Special Purpose Vehicle

! CST: Central Sales Tax

! VAT: Value Added Tax

! DFC: Dedicated Freight Corridor

! C&F: Clearing & Forwarding

! INR: Indian National Rupee

! IIP: Index of Industrial Production

! IGPR: Industrial production growth rate

! CPI: Consumer Price Inflation

! TCI: Transport Corporation of India

! SCS: Supply Chain Solutions

! FTL: Full Truck Load

! LTL: Less than truck load

! DC : Distribution Centre

! ODC: Over dimensional cargo/Hazardous

! EBIDTA: Earnings Before Interest, Taxes, Depreciation and Amortisation.

! XPS: Xpress Parcel Service

! EXIM: Export Import

! LOA: Letter Of Approval

Bibliography

Brochures/information booklets

Websites

! Rajasthan State Industrial Development and Investment Corporation Limited

! Haryana State Industrial and Infrastructural Development Corporation Limited

! Uttar Pradesh State Industrial Development Corporation Limited

! West Bengal Industrial Infrastructure Development Corporation

! Gujarat Industrial Development Corporation

! Maharashtra State Industrial Development Corporation Limited

! Andhra Pradesh Industrial Infrastructure Corporation limited

! Tamil Nadu Industrial Development Corporation

! Karnataka Industrial Areas Development Board

! Government of West Bengal, Annual Report, year 2006-2007

! Skill gaps in the Indian Logistics Sector: A white paper (KPMG & CII)

! The Logistics Sector in India: Overview and Challenges by Pankaj Chandra and Nimit Jain

! Supply Chain Infrastructure Initiatives- Railways a presentation by N. Madhusudan Rao.

! DMIC Status & Opportunities, a Presentation by Delhi-Mumbai Industrial Corridor Development Corporation Limited.

! World Bank

! Department of Industrial Policy & Promotion, Govt. of India

! Ministry of Statistics and Programme Implementation, Govt of India (IIP)

! CIA World Factbook

! United Nations Industrial Development Organisation

! www.sezindia.nic.in

! www.ibef.org

! www.tcil.com

! www.ftwz.com

www.knightfrank.com


Glossary! 3PL: Third Party Logistics

! GDP: Gross Domestic Product


! FDI: Foreign Direct Investment

! CAGR: Compound Annual Growth Rate

! TEU: Twenty feet Equivalent Units

! GSDP: Gross State Domestic Product

! NSDP: Net State Domestic Product

! RIICO: Rajasthan State Industrial Development & Investment Corporation Ltd.

! ICD: Inland Container Depot

! KMP: Kundli Manesar Palwal Expressway


! SPV: Special Purpose Vehicle

! CST: Central Sales Tax

! VAT: Value Added Tax

! DFC: Dedicated Freight Corridor

! C&F: Clearing & Forwarding

! INR: Indian National Rupee

! IIP: Index of Industrial Production

! IGPR: Industrial production growth rate

! CPI: Consumer Price Inflation

! TCI: Transport Corporation of India

! SCS: Supply Chain Solutions

! FTL: Full Truck Load

! LTL: Less than truck load

! DC : Distribution Centre

! ODC: Over dimensional cargo/Hazardous

! EBIDTA: Earnings Before Interest, Taxes, Depreciation and Amortisation.

! XPS: Xpress Parcel Service

! EXIM: Export Import

! LOA: Letter Of Approval

Bibliography

Brochures/information booklets

Websites

! Rajasthan State Industrial Development and Investment Corporation Limited

! Haryana State Industrial and Infrastructural Development Corporation Limited

! Uttar Pradesh State Industrial Development Corporation Limited

! West Bengal Industrial Infrastructure Development Corporation

! Gujarat Industrial Development Corporation

! Maharashtra State Industrial Development Corporation Limited

! Andhra Pradesh Industrial Infrastructure Corporation limited

! Tamil Nadu Industrial Development Corporation

! Karnataka Industrial Areas Development Board

! Government of West Bengal, Annual Report, year 2006-2007

! Skill gaps in the Indian Logistics Sector: A white paper (KPMG & CII)

! The Logistics Sector in India: Overview and Challenges by Pankaj Chandra and Nimit Jain

! Supply Chain Infrastructure Initiatives- Railways a presentation by N. Madhusudan Rao.

! DMIC Status & Opportunities, a Presentation by Delhi-Mumbai Industrial Corridor Development Corporation Limited.

! World Bank

! Department of Industrial Policy & Promotion, Govt. of India

! Ministry of Statistics and Programme Implementation, Govt of India (IIP)

! CIA World Factbook

! United Nations Industrial Development Organisation

! www.sezindia.nic.in

! www.ibef.org

! www.tcil.com

! www.ftwz.com

www.knightfrank.com

Knight Frank Knight FrankIndustry Report 2008 Industry Report 200840A

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www.knightfrank.com


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www.knightfrank.com


www.knightfrank.com

The Industry Report 2008 is

prepared by Knight Frank

India Research.

General enquires should be addressed to:

Tel: +91 22 2267 0876

Fax: +91 22 2267 0899

Sangeeta Sharma

Maureeta Lopez

Anmol Haval

Jyothi Shree Lakshmi

Sunil Vattekat

Vivek Jala

Vidhu Saxena

Gulam M. ZiaNational Director - Advisory Services

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

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Research

Knight Frank Research provide strategic advice, consultancy services and forecasting to a wide range

of clients worldwide including developers, investors, financial and corporate institutions. All recognise

the need for the provision of expert independent advice customised to their specific needs.

Knight Frank Research Reports are also available at www.knightfrank.com

© Knight Frank 2008

This report is published for general information only. Although high standards have been used in the preparation of

the information, analysis, views and projections presented in this report, no legal responsibility can be accepted by

Knight Frank Research or Knight Frank for any loss or damage resultant from the contents of this document. As a

general report, this material does not necessarily represent the view of Knight Frank in relation to particular

properties or projects. Reproduction of this report in whole or in part is allowed with proper reference to Knight

Frank Research.

Asia

China

Hong Kong

India

Indonesia

Macau

Malaysia

Singapore

Thailand

Africa

Botswana

Kenya

Malawi

Nigeria

Zambia

South Africa

Tanzania

Uganda

Zimbabwe

Europe

UK

Belgium

Czech Republic

France

Germany

Hungary

Ireland

Italy

Poland

Portugal

Russia

Spain

The Netherlands

Ukraine

Americas

Australasia

USA

Brazil

Caribbean

Australia

New Zealand

Bermuda

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