>Arshiya International Ltd (INDIA CAPITAL MARKET)

Revenues declined to Rs 940 mn (28% yoy, 18% qoq) in Q4FY09 impacted by decreasing freight rates in logistics segment. Arshiya’s end to end logistics declined by 20% yoy due to global economic slowdown. In FY09, Arshiya net added 62 new clients in India & Middle East for its logistics division. In Q4FY09, EBIDTA margins improved by 260 bps to 15.8% due to improvement in supply chain services and more demand of Cyberlog IT solutions.

Arshiya International has commenced rail operations with two rakes for Vedanta Aluminium Ltd & Mitsubishi. Arshiya will provide customized solution to its clients through its dedicated rakes on a long term contract basis. The 3rdrake is expected to commence by Q1FY2010.

Management has guided that the company will deploy 30 rakes of Phase I project by Q1FY2011 in domestic segment with the capex of Rs 6.26 bn. The D/E of this project will be 1.8 : 1. For FY09 Arshiya’s revenues increased by 25% to Rs 5 bn, while EBDITA grew by 47% to Rs 762 mn. EBIDTA margins expanded to 15.2% (+230 bps) due to change in revenue mix. In FY09,

Arshiya’s volume handling increased by 35% to Rs 42000 TEUs. Arshiya has entered into long term contracts for its rail container business. The 3rd rake is expected to start in current quarter for domestic segment.

FTWZs – delayed by three months
Arshiya has received formal approval from Board of Approval (BoA) of SEZs for JNPT FTWZ, while it is still waiting for the final approval. We expect the delay in BoA approval will defer the development work at FTWZ which is now expected to start its commercial operations by Q4FY2010. The company has earmarked the capex of Rs 5.3 bn for this project. Arshiya has tied up its capex with lead bankers for JNPT FTWZ project. Arshiya has received formal approval for FTWZ in Khurja, Delhi. The company will incur the capex of Rs 4.4 bn and are in the process for debt arranging with bankers.

Arshiya has acquired the land for Central FTWZ (Nagpur) which is anticipated to be at an investment of Rs 2 bn. Management has indicated that FTWZ at Sohar in Oman is dropped due to regulatory issues on leasing of land.

Outlook & Valuations
We expect business outlook for all logistic companies to remain weak through H1FY2010, due to global economic slowdown. Though we are positive on the delivery expertise of the company and its expansion plan, external environment presents significant scope for downward revision of its expected numbers. Moreover the delay in FTWZ approval will further shift the revenue to a future date. Though the business environment is bleak, we are positive on the company’s future plan and expertise. We recommend a ‘HOLD’ till our next update.

To see full report: ARSHIYA INTERNATIONAL