November 22, 2008

VRL Logistics draws up INR 1100 crore CAPEX plan

ET reported that Indian logistics major VRL Logistics is on course for a major expansion of its facilities in India with an estimated investment of INR 1,100 crore over the next 2 years. It is planning to opt for pre IPO placements too.

With a top line of INR 4,400 crore in 2007, VRL Logistics plans to invest INR 539 crore towards the development of transhipment hubs in Gurgaon, Solapur and Bijapur. As per information furnished to SEBI, it plans to invest another INR 530 crore towards the expansion of its truck and bus fleet. A booking and delivery office with an investment of INR 40 crore is also planned at Gadag.

Presently, VRL has a fleet of 2,446 vehicles for transporting goods. It transports industrial freight such as textiles, agricultural products and pharmaceutical products. It is also planning to start transportation of iron ore from Karnataka for which it needs 300 trucks with higher tonnage capacity with more than 15 tonne.

The investment for fleet expansion is high on account of the number of trucks being added and also due to specialized designing of cargo trucks undertaken by the company at Varur. As the company owns a large fleet, its maintenance has pushed up VRL’s working capital needs significantly from INR 105.28 crore in fiscal 2005 to INR 223.5 crore for 6 months ended September 30th 2007.

VRL’s goods transportation business is based on a ‘hub and spoke’ model. Transhipment hubs located in major cities act as hubs and various booking points as spokes. Once, consignments are booked at the spoke, they are unloaded at the nearest hub based on destination of the consignment. VRL currently owns and operates 43 transhipment hubs in India.

The Gurgaon hub is expected to be spread over 8 acres, Solapur over 7 acres and Bijapur hub across 2 acres. To economize on fuel expenses, VRL plans to create high speed diesel consumer pumps at the 3 sites.