Brace Port Logistics IPO: Is This Ship Sailing in the Absolutely Wrong Direction?

Brace Port Logistics Introduction

Brace Port Logistics Limited is a service-based logistics company with over 20 years of industry expertise. They specialize in creating highly optimized and customized supply chain solutions for their clients using unified technology systems. The company is known for its flexibility in supply chain management, effectively finding the best routes and pricing options for shipments.

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Brief about Brace Port Logistics

• Skyway Air Services Private Limited, the Promoter of Brace Port Logistics Company, is also Holding Company

Summary of the business of Brace Port Logistics

Brace Port Logistics Company is a service-based logistics company primarily engaged in the business of providing Ocean cargo logistics services to our clients operating in the various sectors of the economy. We also provide various value-added services like Air Freight, Warehousing facilities, special cargo services and custom clearance services. Brace Port Logistics company along with group companies and holding company have extensive network across the globe. We provide our services at a worldwide level where cater for clients across the globe and even provide cross-border shipment facilities as well.

History of Brace Port Logistics

Brace Port Logistics Company was originally incorporated as “Brace Port Logistics Private Limited” at New Delhi as a private limited company under the Companies Act, 2013, having Corporate Identification Number (CIN) U63030DL2020PTC372878, pursuant to a certificate of incorporation dated November 07, 2020, issued by the Central Registration Centre, Manesar. Subsequently, Brace Port Logistics Company was converted into a public limited company under the Companies Act, 2013, pursuant to the approval accorded by our Shareholders at their extra-ordinary general meeting held on July 10, 2023. Consequently, the name of Brace Port Logistics Company was changed to “Brace Port Logistics Limited” and a fresh certificate of incorporation consequent upon conversion from a private limited company to a public limited company was issued to our Company by the RoC, Delhi on August 07, 2023, and our Corporate Identification Number (CIN) is U63030DL2020PLC372878. The registered office of our company is situated at A-182, Mahipalpur Extension, 5, Road No 4, South Delhi, Mahipalpur, New Delhi -110037.

Promoters & Board of Directors of Brace Port Logistics

• The Promoters of our Company are
  • Mr. Yash Pal Sharma
  • Mr. Tarun Sharma
  • Mr. Sachin Arora
  • Mr. Rishi Trehan
  • M/s Skyways Air Services Private Limited.

Board of directors of Brace Port Logistics

Share Holding pattern

Strength of Brace Port Logistics

• Accomplished Leadership Team and qualified workforce
• Long Lasting Business Relationships
• PAN India and Global Reach
• Comprehensive Solutions for Transportation requirements
• Diverse customer base across many sectors
• Technology integrated services.
• Quality of Services
• Supplier Relationship

Strategies of Brace Port Logistics

• Expanding our presence across the globe
• Focus on quality
• Focus on onboarding competent and efficient talent pool
• Capitalize on the growth of the third-party logistics industry in India

Industry Outlook

LOGISTICS INDUSTRY GLOBAL MARKET

The logistics industry facilitates the trade entrepreneurial activities between two or more parties by
transporting, storing, and delivering goods through B2B, B2C, or C2C supply chain networks. At the present time, logistics companies implement cargo transportation services by land, air, and water while adapting to the changing nature of economic patterns and digitization. As one of the backbones of international trade, the logistics industry worldwide was worth over 8.4 trillion euros in 2021 and is expected to exceed 13.7 billion euros by 2027. Correspondingly, global total logistics costs soared to nine trillion U. S. dollars in 2020. That represents 10.7 percent of the global Gross Domestic Product (GDP) of 85.24 trillion U. S. dollars that year.

The Asia-Pacific logistics market is the largest in the world, with a market size worth about 3.9 trillion
U.S. dollars in 2020 alone. The leading position of the region is attributed to the expansion of trade routes and the shift of industrial production to Asian countries. For instance, container trade flow within Asia was larger than any trade lane in the world, amounting to a volume of 41.5 million TEUs in 2021.

Freight forwarding and e-commerce logistics market development:

With a market size of 192.5 billion euros in 2021, global freight forwarding provides the logistics industry with quicker and easier solutions to the transportation process. DHL, Kuehne + Nagel, DSV, and DB Schenker are the leading companies in the global freight forwarding market. Specifically, Kuehne + Nagel, Sinotrans, and DHL were the world’s top three ocean freight forwarders by ocean freight volume in the twenty-foot equivalent unit (TEUs). As an essential part of the e-commerce business, logistics is responsible for planning, controlling, and moving goods from their origin to end users. Driven by the rise of the global e-commerce industry and the consequent growth of intra- regional and cross-border trade, the global e-commerce logistics market reached 441 billion euros in 2021. Notably, the COVID-19 pandemic presented a unique opportunity for more e-commerce logistics investment. The surge in e-commerce sales has aided two U. S. shipping giants, UPS Inc. and FedEx Corp., to seize their positions as the world’s leading freight carriers in 2021, each with freight revenues of more than 70 billion U.S. dollars. However, dramatic developments on a global scale in 2022, such as the Russia-Ukraine war, inflation, and supply chain shocks are pointing at a global recession and forcing a slowdown in the performance of many major e-commerce companies and the associated logistics market.

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LOGISTICS INDUSTRY BACKGROUND & OVERVIEW

The express industry started in the United States in 1850s when the United States Congress sanctioned overland stage route that carried mail and other parcels. In due course, the industry

moved out of the United States and became a global industry. As trade increased, the role of the express industry in the global environment grew even more significant. Initially the express delivery mainly comprised of documents and parcel which are high value and low weight items. Subsequently as customer demand for on time delivery increased, the use of express delivery services by other industries also increased. Today the global express market is worth around 225 USD billion^ and has a CAGR of 4%.

INDIAN LOGISTIC MARKET

While India is a very small market in global express industry with less than 2% of the global market size, India has one of the fastest growing express industry. The Indian express industry started in very unorganized way few centuries ago, where traders used to send urgent and high value cargo to destination by ‘Angadia’ i.e., someone who carriers the high value cargo with him in person. The first organized player to start its operation in India was Government of India itself. Government launched Speed Post in 1980. Subsequently, in 1980s, few international express companies entered the Indian market in joint venture with Indian companies. DHL started operation in India in the year 1979 to help make exports easier for SMEs. Whereas, FedEx started its operation in 1984 in India. TNT had started its services much later in 2006. UPS entered India in the year 2001 with its acquisition of Fritz Inc in 2001.

In case of domestic landscape, Gati as a division of TCI was the first player that started express distribution in India by surface mode. Gati started its operation between Madras and Madurai. Almost at the same time, Bluedart started with express services for documents. Later on, Bluedart entered the air cargo and surface express distribution services. As market size and scope for growth kept on increasing, other players such as Safexpress entered the market.

According to our research, the industry registered CAGR of close to 15% to reach USD 5.5 Bn in 2020. FY 21 witnessed a dip in momentum of growth due to pandemic. The surface express industry accounts for 3% of the total surface transportation market. However, in future this segment is expected to maintain the momentum of growth at more than 15% per annum. The Indian Express industry is fragmented and has an estimated 1000 active players. There are around 15 major players in the domestic express market. The rest are a combination of small and medium sized players. In case of domestic express business, most of the players are home grown and some of them have been acquired by global logistics players. However, as compared to Full Truck Load and Part Truck Load industry,

express industry is highly organized. Large players contribute to around 75% of the market while the rest is a combination of medium and small sized players.

INDUSTRY VERTICAL

Express logistics transportation delivers value in terms of time and safe handling of product verses conventional transportation. Very high time sensitive shipment uses air mode, while other time sensitive material requiring relatively faster delivery in order to drive efficiency through reduced TAT, uses surface express mode for logistics. Although almost every industry uses express logistics service but the quantum of usage varies significantly. Some of the major users of this service include Apparel, Pharma, Auto, ecommerce and electronics. Pharmaceuticals and Auto has been major contributor to Express logistics since beginning.
In pharmaceuticals sector express logistics is not used for bulk transfers from plant to CFA / regional distribution center, instead it is used in shipping of smaller volume stock transfer, inter depot transfer and physician sample. In automobile sector express mode is not for logistics of finished vehicle transportation, instead its more for aftermarket spare movements. Express logistics usage in apparel industry has increased in last decade with the growth of multi brand and single brand retail industry, wherein apparel companies utilize express service to directly ship the products to retail outlets. Volume contribution from e-commerce players have seen a steep jump in express logistics. Its premaritally a stock transfer from one distribution center to other distribution center.

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On the other hand, industry that has very high volume and low value products does not use express distribution i.e: FMCG. Even in case of very high value and moderate volume, express is not preferred over dedicated transportation mode.

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Trends in B2B express logistics

• Reduced Transit time
  • As businesses aim for the next level of growth, improving service level plays a critical role in it. Road infrastructure of country has improved year over year in last decade. This has resulted in reduction of overall transit time of express cargo. Now a days an express vehicle with double driver covers around 850 Km per day, which used to hover around 650 Km per day in past. Even the similar trends of improvement in travel speed have been registered in other segments like FTL.
• Network Reach:
  • The reach of the express players is no longer a differentiator i.e. it has become a Hygiene. This is because a lot of companies have expanded their network so as to improve efficiency of business operations. Now more focus is moving to rural area reach for deliveries especially due to e-commerce rise.
• Information Availability:
  • Initially information availability such as delivery status, parcel tracking, payment status, etc. formed a major difference between top players and others. However, now all the companies have adopted various IT solutions that provide information to their customers i.e. just like Network reach, it has become a hygiene and is no longer a major differentiator. Now industry is moving to proactive information and alerts, instead of only sharing the status.
• Cost Optimization:
  • Competition has increased in the B2B express segment as new entrants are entering the market due to good growth prospects. On the other hand, companies that utilize the express services are looking for cheaper alternatives. This has negatively impacted the margins of various B2B express service providers. Because of the competition and margin reductions, companies are continuously focusing to optimize their processes to reduce the cost. Thus, cost optimization has become a major factor for companies.
• Service Quality:
  • Companies are increasingly focusing on improving their service quality level. To cater to this demand, companies are investing not only in expanding their reach but also in automation, process standardization, training, and development, thereby fulfilling their customer expectations.
• Outsourcing non-core activities:
  • There is growing trend of businesses outsourcing their non non- core areas such as logistics to specialized players. This is done so that companies can focus on their core business activity and grow faster.
• Integrated offering:
  • Logistics service providers are increasingly offering integrated services to their clients. Under single integrated umbrella supply chain services range from warehousing, value added services to transportation. In this journey of integrated express logistics have played a vital role in delivering on time delivery and supported growth of warehousing industry, especially post GST when companies went for their distribution network optimization. This trend is expected to continue in future.

The logistics sector globally has a market size of over USD 5.2 trillion as per a report from IMARC group. On average, sector accounts for anywhere between 8–20% in various country’s GDP. Logistics costs in India are higher than those in developed countries. USA spends 9.5 per cent of the GDP on logistics while Germany is even more competitive with a share of eight per cent. Higher logistics costs in India could be ascribed to the lack of efficient inter-modal and multi-modal traditional systems thereby presenting significant future scope for development and efficiency. India has the second-largest population in the world with 1.38 billion people and its logistics market is estimated to be around $210 Billion. The domestic logistics market is growing at a faster pace than the economy and is expected to maintain its CAGR of 8-10% in the coming years. As per various reports, the logistics sector contributes around 13% of GDP. The last decade has witnessed multifold changes in logistics landscape like implementation of GST, improvement in road infrastructure and high degree of automation leading to improvement in logistics efficiency. It is estimated that these reforms have led to around 200 to 300 BPS improvement in overall logistics cost to GDP ratio. Going forward we also expect reduction in it, as a resultant of following facts

• Fast tracking western DFC and announcing three new DFC’s
• Sagarmala project to promote inland waterway transport
• Make in India initiative to provide industrial clusters along the key logistic routes
• Scheduled trains to lower lead time
• Increase in in-house development of software
• Usage of RFID’s to real time tracking
• Tech based security to reduce pilferage
• Increase focus on services in addition to time and cost by corporates

Lockdown imposed due to COVID-19 was a huge shock on the Indian Economy as well as the Indian logistics Industry. The impact was especially serious for the transportation sector in the initial few weeks, due to strict restrictions on movement of goods vehicle limiting to only essentials. The logistics sector also faced intense labor crisis in initial months of FY21. However, the workforce returned and resumed their respective duties after 2-3 months of lockdown. As lockdowns were lifted across the country, the logistics industry, in cohesion with the economy showed high degree of resilience. In the year of pandemic in FY 21 total cargo volume for Indian railway has registered a growth of 2% in volume and 3% in revenue terms with a load of 1232 Mn ton^. After sharp dip in e-way bills generation during April 2020, it witnessed a consistent growth post lockdown and in the month of march FY 21 it touched the ever-highest figure of 71.2 million e-way bills. Similarly in EXIM, international trade suffered significantly because of lockdown around the world and in India as well. But, as the lockdowns were lifted across the world, the total export shipments grew by 60.29% to $34.45 billion in March 21.

Ocean Freight

Waterways account for a total of only 8% of cargo movement in India. Water transportation has a definite edge over other modes, in terms of possessing the highest carrying capacity and being the best suited for long distance carriage of bulky goods at lowest cost. India has a huge coastline of 7517 KM and is surrounded on three sides by the sea. India has in total 11 major and 168 minor/intermediate ports across the country. This creates huge scope for movement of cargo along the Indian coast. There are many advantages of coastal shipping ranging from cost saving to the shipper to reduction of road traffic and carbon emission. According to government, India has witnessed a growth of 11.3% of cargo movement on coastal routes from 2015-16 to 2018-19. The total cargo movement is expected to reach 250 MTPA by 2025. Coastal shipping is ideal for commodities like Petroleum, Oil, lubricant, construction material, dry bulk cargo like food grains, fertilizers, steel, coal and minerals.

To improve the share of coastal shipping and inland waterways, government has taken several major initiatives, which in turn will increase the share in terms of total modal mix cargo movement. India has approximately 14,500 km of navigable waterways comprising of rivers, canals, backwaters, creeks etc which has significant growth potential, as a mode of transportation. To develop this mode Government of India established Inland Waterways Authority of India (IWAI) under Ministry of Shipping in 1986 to develop and regulate the inland waterways for shipping and navigation. Huge investment is being planned to develop National Waterways with nearly `2,000 crore invested in National Waterway-1. Of the three multimodal terminals to be built on the Ganga River under JMVP, the one at Varanasi in UP and Sahibganj in Jharkhand are already operational. Work on the third terminal at Haldia and a new navigation lock at Farakka (both in West Bengal) is on in full swing. Government data shows that cargo movement by IWT has increased to 72.31 MT in fiscal 2019 from
55.03 MT in fiscal 2018 with plans to push it up to 150 MT by 2025.

Air Freight

While the focus has been mostly on-air passenger market in India, air cargo segment is also an important part of India’s growth story. The airways share of the modal mix accounts for less than 2% of the total. The materials which are carried by the air for cargo movement are mostly items which are time sensitive in nature like Pharmaceuticals, Healthcare, Electronics, wireless telephony, and Automotive Spares etc apart from horticulture and perishable. For non-time sensitive cargo movement of goods, airways are not preferred as it is expensive when compared to other modes of transport. The cargo movement by air takes place by following ways:

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• Dedicated Air cargo: These are dedicated freighter for air cargo.
• Belly Cargo Movement: This movement of cargo usually takes place in the belly of the commercial planes.

Role of air cargo is very critical due to its efficiency in transit times. Despite being multiple times costlier than other modes, it proves to inevitable for many product categories. The international air cargo industry is highly organized due to regulations of international body (IATA). More than 75% of the air freight market in India is with organized players.

Warehousing

The warehousing market in India is estimated to be worth 12 billion USD in 2020^ and is growing at a faster pace. The warehousing has attracted more than $ 6.5 Bn investment since 2017 and market is expected to attract more investment in next 5 years. In terms of land availability for development, warehousing has a potential FSI of 500 mn sq ft across the major 8 cities in India, while existing stock across these cities is 307 mn sq ft. The growth in warehousing market is driven by various factors such as rising share of India’s businesses in the international markets, demand for greater storage, rise in e-commerce businesses, etc. Post GST implementation, companies which had a network of small warehouses due to tax efficiencies, have started shifting and prioritizing larger warehouse in more strategic locations.

Warehousing market demand is driven by the growth in manufacturing, retail, FMCG, e-commerce and logistics sectors. Furthermore, supportive government policies such as GST, easy clearances for land, 100% FDI, establishment of logistic parks / MMLP and FTWZ are expected to be a major driver for the sector. GST implementation has led to the removal of check points thereby diminishing state boundaries and created a way for setting up large efficient warehouses.
3PL and e-commerce are the largest lessors of the warehousing space with more than 60% share. This is in line with the trend of more and more companies outsourcing their non-core business operations to experts and focusing on the core area for faster growth. This trend of outsourcing to 3 PL is expected to continue in future. E-commerce has risen significantly in India over the last 10 years and this unprecedented rise has made e-commerce a major user of the warehousing segment. The 3PL market is estimated to be worth around USD $8 Bn.

Indian Express Industry has come a long way in last four decades and evolved in terms of product offering & service quality. In the last decade segments like e‐commerce and on demand logistics have changed the complete paradigm of the sector. Outlook of the sector is very positive and CAGR is expected to be more than 15% in next decade. By year 2025 it’s market size is estimated to be around
$ 10 bn.

In the Express domain we foresee few key changes as follow:

• Organized Play:
  • In the mid to long term, express cargo will be confined to large, organized players of industry. In the short to medium term competition will be fiercer to gain more market share between organized players. The role of regional express players will get more diluted and many of such regional players may cease to exist. Some more organized players are expected to enter in this domain in next few years.
• Acquisition, Merger & Consolidation:
  • Express market is going to witness more M&A. In 2019 Reliance acquired a delivery startup Grab and in 2020 Allcargo acquired an established express player Gati and in 2021 acquisition of Spoton by Delhivery. As per current scenario projected number of express players seems to be much higher than a mature competitive market, therefore we estimate few more M&A to take place in coming years. Post these M&A there will be 4-5 large express players providing complete array of express logistics services apart from few regional players.
• Unified service offering in express:
  • Earlier the express market was quite divided based on nature of shipment and consignee. Accordingly various businesses and positioning of companies developed over period like document courier company, Surface express distribution company, Air cargo, e-commerce logistics company etc. But going forward these different services are expected to be under one umbrella and single service provider to render services across segments of express with same efficiency. This phenomenon may lead to realignment of product portfolio strategies for various express players.
• Innovation and technology adoption:
  • In future, digitization and automation will be prerequisite of express business. Technology will not remain as enabler, instead it will be driving processes, efficiency & optimization. Whole range of new technologies from data analytics to automation to quantum computing and 3D printing will be instrumental in growth. New entrant will be early adopters of technology and will become a force for whole ecosystem for accelerated adoption. On the service front we expect more seamless integration with global express industry. With increasing complexities of supply chain and ease of cross border trade we foresee bigger role of the express logistics with integrated and innovative service offerings, which can be valuable for critical part logistics.

Business Data of Brace Port Logistics

Verticals of Brace Port Logistics

• AIR freight
• OCEAN freight

Product wise break-up of Brace Port Logistics

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Revenue contribution from Geography presence of Brace Port Logistics

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Customer dependency of Brace Port Logistics

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Supplier dependency of Brace Port Logistics

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Machinery/Plants/Factory

• Registered Office / Corporate Office: A-182, Mahipalpur Extension, road no 4, Mahipalpur, New Delhi- 110037
• Branch Office 1: Office number 50, Manglam Jaipur, Electronic Market, Gopalpura Bypass, Jaipur
• Branch Office 2: Old no. 78, new no. 65, 1st Floor, Gandhi Road, Palavanthangal, Chennai- 600114, Tamil Nadu
• Branch Office 3: C/401, Aditya CHSL, Mhada SVP Nagar, Opposite Versova Telephone Exchange Four Bungalows, Andheri West, Mumbai

Competition

The industry in which we operate is unorganized and fragmented with many small and medium-sized companies. The logistics industry being a global industry, we face competition from various domestic and international players. We compete with other traders based on service quality, price, and reliability. Our scale and scope of our operations allow us to meet our customers’ requirements better

than the smaller enterprises. Since due to industry’s fragmented nature, there is no authentic data available on total industry size and thus we can’t determine the markets share of our Company vis-a- vis the competitors.
The principal elements of competition in our industry are quality, technical ability, performance record, sustainable relationship with existing clients and vendors, use of technically, timely delivery and reliability. We compete against our competitors by establishing ourselves as a emerging player with industry expertise in the segment which enables us to provide our clients with quality. However, price is the deciding factor in most cases.

Peer companies comparison

(Rs. in Lakhs)

Group companies

• Forin Container Line Private Limited
• Skart Global Express Private Limited
• Phantom Express Private Limited
• Sgate Tech Solutions Private Limited (Formally Known as Total Internet Solutions Private Limited)
• Skyways SLS Frugal (BD) Private Limited
• Skyways SLS Logistics GMBH

SWOT ANALYSIS

• Strengths
  • Extensive Industry Experience: With over 20 years in the logistics industry, Brace Port Logistics has a wealth of knowledge and expertise.
  • Global Network: The company operates in over 60 countries across six continents, providing a broad reach and diverse market presence.
  • Comprehensive Service Offering: They offer a wide range of services including air and ocean freight forwarding, customs brokerage, vendor consolidation, cargo insurance, transportation, warehousing, and distribution.
  • Technological Integration: Use of unified technology systems to optimize supply chain solutions, enhancing efficiency and customer satisfaction.
  • Industry Specialization: Catering to various industries such as medical supplies, pharmaceuticals, sports goods, perishables, electronics, consumer durables, and automotive.
• Weaknesses
  • High Operational Costs: The extensive global operations and comprehensive service offerings may lead to high operational costs.
  • Dependency on Global Trade: The company’s performance is closely tied to global trade dynamics, which can be volatile.
  • Complex Supply Chain Management: Managing a vast and complex supply chain network can pose challenges in terms of coordination and efficiency.
• Opportunities
  • Expansion into Emerging Markets: There is potential for growth in emerging markets where logistics infrastructure is developing.
  • Technological Advancements: Continued investment in technology can further streamline operations and improve service offerings.
  • Sustainability Initiatives: Increasing focus on sustainable logistics solutions can attract environmentally conscious clients and partners.
  • E-commerce Growth: The rise of e-commerce presents opportunities for increased demand in logistics and supply chain services.
• Threats
  • Economic Fluctuations: Economic downturns can negatively impact global trade and, consequently, the logistics industry.
  • Regulatory Changes: Changes in trade policies, tariffs, and regulations can affect operations and profitability.
  • Intense Competition: The logistics industry is highly competitive, with many players vying for market share.
  • Technological Disruptions: Rapid technological changes can pose a threat if the company fails to keep up with the latest advancements.

Business risk factors

• Brace Port Logistics freight forwarding business depends upon our network of overseas agents for fulfilment of logistics needs of our customers. Our inability to maintain our relationships with the overseas agents or deficiency in the service provided by such agents may adversely affect our revenues and profitability.
• Brace Port Logistics depend on certain key customers for our revenues. A decrease in the revenues we derive from them could materially and adversely affect our business, results of operations, cash flows and financial condition.

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Financials

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IPO Details

Brace Port Logistics IPO Details

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Gray Market Premium

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