Lancer Containers Lines Ltd Management Discussions

Global Economy

The global economy has shown remarkable resilience, maintaining steady growth as inflation returns to target. Despite numerous challenges post-pandemic supply chain disruptions, the Russian-initiated war on Ukraine causing a global energy and food crisis, and a surge in inflation followed by synchronized monetary policy tightening the world avoided a recession. The banking system remained largely stable, and major emerging markets did not experience sudden stops. The inflation surge, despite its severity and associated cost-of-living crisis, did not lead to uncontrolled wage-price spirals and is now receding. Global growth hit a low of 2.3% year-over-year at the end of 2022, just after median headline inflation peaked at 9.4%. Projections for 2024 and 2025 show growth steady at 3.2%, with median headline inflation dropping from 2.8% at the end of 2024 to 2.4% at the end of 2025. Indicators suggest a soft landing, as markets responded positively to the prospect of central banks easing tight monetary policy. Financial conditions improved, equity valuations rose, and capital flows to most emerging markets, excluding China, have been strong, with some low-income and frontier economies regaining market access. The economic scarring from the pandemic is now expected to be less severe, especially for emerging markets, aided by robust employment growth. The US economy has already surpassed its pre-pandemic trend. Resilient growth and faster disinflation indicate favorable supply developments, such as fading energy price shocks and increased labor supply due to strong immigration in many advanced economies. Decisive monetary policies and improved frameworks, particularly in emerging markets, have anchored inflation expectations.

Despite these positive developments, challenges remain, and decisive actions are needed. While inflation trends are encouraging, recent median headline and core inflation numbers have risen slightly. This could be temporary, but vigilance is required. Most progress on inflation has come from declining energy prices and goods inflation below the historical average, aided by easing supply-chain frictions and lower Chinese export prices. However, services inflation remains high and could derail the disinflation path, making it crucial to bring inflation down to target. Additionally, global progress masks significant divergences across countries. The US has performed exceptionally well, driven by strong demand and an unsustainable fiscal stance, raising short-term risks to disinflation and long-term fiscal and financial stability risks globally, potentially pushing global funding costs. Addressing these issues remains essential.

Indian Economy

India is one of the worlds fastest-growing economies and aims to achieve high middle-income status by 2047, the centenary of its independence. The country is also committed to addressing climate change and achieving net-zero emissions by 2070. Over the past two decades, India has made significant progress in reducing extreme poverty, halving the population living on less than $2.15 per day between 2011 and 2019. However, the pace of poverty reduction has slowed, particularly during the COVID-19 pandemic, though it moderated in 2021-22.

Challenges remain, such as consumption inequality, with a Gini index around 35 over the past two decades, and high child malnutrition rates, with 35.5% of children under five stunted. While headline employment indicators have improved since 2020, concerns persist about job quality, real wage growth, and low female labor force participation.

To achieve high-income status by 2047, India needs a climate-resilient growth process that delivers broad-based gains to the bottom half of the population. Growth-oriented reforms must be accompanied by the creation of quality jobs to match the number of labor market entrants. Additionally, addressing economic participation gaps, particularly by increasing womens workforce participation, is essential.

Global Logistics Industry

The market is experiencing steady growth, fueled by the expansion of e-commerce, technological advancements, and increasing globalization. The diversification of services including traditional transportation, warehousing, and sophisticated supply chain management solutions is also contributing to market growth.

Key drivers include the growth of the e-commerce sector and rapid technological progress, particularly in automation and artificial intelligence (AI), which are streamlining logistics processes. Market trends highlight a growing emphasis on sustainability, with companies adopting eco-friendly practices such as electric vehicles (EVs) and optimizing delivery routes to reduce environmental impact. Additionally, the integration of block chain technology is enhancing transparency and security in supply chain management, further boosting market expansion.

The Asia Pacific region is leading the market, driven by rising industrialization, urbanization, and a rapidly growing e-commerce sector. Other regions are also showing significant growth, supported by expanding manufacturing bases, ongoing technological innovations, and increasing digital penetration.

Despite these positive trends, the market faces several challenges. Adapting to rapidly changing consumer demands, managing the complexities of global supply chains, and reducing logistics-related carbon footprints are ongoing concerns. However, the rising demand for last-mile delivery solutions and the potential for technological innovations to create more efficient and sustainable logistics systems present new opportunities for market growth. These advancements are likely to drive future expansion and address existing challenges in the logistics sector.

Indian Logistics Industry

The Indian logistics sector, one of the largest globally, is vital to the countrys economic growth, connecting transportation, warehousing, and supply chain solutions. The Department of Commerce established a logistics division in July 2017, led by the Special Secretary to the Government of India, to oversee sector development through policy reforms, process improvements, and technology adoption.

The sector is evolving rapidly, driven by technological advancements, infrastructure upgrades, and government initiatives like GST implementation and the National Logistics Policy (NLP). Innovations such as Radio Frequency Identification (RFID) and Global Positioning System (GPS) are enhancing operational efficiency and reducing costs. The surge in e-commerce and international trade is increasing demand for streamlined logistics solutions. Despite challenges like infrastructural deficits and regulatory complexities, the sector is poised for significant growth, offering opportunities for both domestic and international players.

The manufacturing sector, which represented 15.3% of GDP in FY22, stands to benefit from the governments ‘Make in India initiative and its aim to establish India as a global manufacturing hub. As manufacturing bases shift globally, India has the opportunity to build top-tier infrastructure and attract companies. Efficient, technology-enabled supply chain solutions will be crucial to support this growth. Indias logistics sector is leveraging technology to automate and optimize processes, improving its global ranking in manufacturing performance and logistics. Over the past five years, India has risen six places to 38th out of 139 countries on the Logistics Performance Index, reflecting its progress and potential in the logistics and manufacturing sectors.

# 2023 rank is grouped out of 139 countries, 2018 rank is considered out of 160 countries Source: World Bank Logistics Performance Index Report 2023

Indias logistics and supply chain industry is undergoing a major transformation due to several government initiatives aimed at enhancing efficiency and reducing turnaround times. Key initiatives include:

Dedicated Freight Corridors: High-speed railway corridors have been established to improve the transportation of goods across India. As of January 2023, 1,724 kilometers of these corridors are operational, connecting major hubs like Delhi, Mumbai, Chennai, and Howrah.

Multi-Modal Logistics Parks: These parks, covering at least 100 acres each, offer access to various transportation modes road, rail, and air along with advanced storage solutions like mechanized warehouses and cold storage. A total investment of Rs. 50,000 crores has been made to establish 35 such parks, aiming to optimize logistics operations and reduce costs. Parivahan Portal: This digital platform, including the ‘SARATHI and ‘VAHAN services, streamlines vehicle registration and driving license processes. The ‘mParivahan app facilitates easier access to information and reduces paperwork and bureaucratic hurdles.

PM GatiShakti: Launched in October 2021, this initiative aims to improve logistics efficiency by coordinating planning among various agencies. It focuses on integrating infrastructure and logistics networks to minimize disruptions and enhance connectivity, with a planned capital expenditure of Rs. 7.5 lakh crore (USD 90.26 billion) for 2022-23.

National Logistics Policy (NLP): Released in 2022, NLP seeks to make the logistics sector more integrated and competitive. It aims to create a single-window e-logistics market and lower logistics costs as a percentage of GDP.

Logistics Efficiency Enhancement Programme (LEEP): This program is designed to improve freight transport efficiency through infrastructure technology and process interventions, reducing associated costs and transportation time.

Trade Facilitation: To enhance trade, an EXIM Logistics Group has been created, and infrastructure projects are underway to strengthen port connectivity. The Logistics Data Bank app monitors EXIM cargo to improve predictability, transparency, and reduce costs.

Overall, these initiatives are driving significant changes in Indias logistics sector, aiming to support economic growth through improved infrastructure and efficient supply chain solutions

EVOLUTIONARY TRENDS: Leveraging Emerging Opportunities in the Logistics Industry

The logistics industry has undergone significant transformations in 2023, driven by advancements in technology, data utilization, and infrastructure development. These changes present opportunities for businesses to leverage innovative tools and set growth objectives. Key trends include:

Artificial Intelligence (AI) and Machine Learning (ML): AI and ML enhance logistics through predictive analytics, demand forecasting, route optimization, and real-time decision-making, improving supply chain efficiency and customer experiences.

• Internet of Things (IoT): IoT devices provide greater visibility and control over assets and inventory, enabling real-time tracking, remote monitoring, and predictive maintenance.

Robotics and Automation: Automation technologies, including robotic process automation and autonomous vehicles, streamline warehouse operations and last-mile delivery, increasing speed, accuracy, and safety while reducing costs.

Predictive Analytics: By analyzing historical and real-time data, businesses can forecast demand fluctuations, optimize inventory, and enhance supply chain resilience, reducing stockouts and holding costs.

• Supply Chain Visibility: Comprehensive data integration and visibility facilitate end-to-end traceability, proactive issue identification, and effective problem resolution, fostering collaboration and trust among supply chain partners.

Robotics and Drone Technology

The global logistics robots market, valued at USD 7.11 billion in 2022, is expected to reach USD 21.01 billion by 2029. Robotics and drones address complex supply chain needs, including surveillance, remote access, urgent deliveries, and efficient warehouse management.

Innovative Start-Ups

New-age start-ups are driving logistics innovation through AI, IoT, blockchain, and data analytics. They enhance supply chain operations, boost transparency, and improve efficiency with solutions for real-time tracking, route optimization, and streamlined processes. These start-ups also innovate last-mile delivery and digital freight marketplaces, promoting sustainability and reducing costs.

Cross-Border E-Commerce

The rise of cross-border e-commerce, driven by millennial consumers, has increased demand for international goods and efficient delivery services. Businesses must navigate customs laws, language barriers, and payment options to meet these demands, making robust digital infrastructure and end-to-end solutions crucial for success.

Last-Mile Connectivity Innovations

Advancements in last-mile delivery, including GPS tracking, drones, and autonomous vehicles, enhance route optimization and delivery speed. These innovations help overcome challenges in urban congestion and remote areas, improving service quality and competitiveness.

Collaborative Frameworks

Emphasizing partnerships and integration across the supply chain, collaborative frameworks streamline processes, reduce delays, and optimize resource use. Shared infrastructure, data exchange, and coordinated decision-making enhance efficiency, flexibility, and resilience in logistics operations.

These trends indicate a shift toward a more interconnected, technology-driven, and customer-centric logistics ecosystem. Embracing innovation and collaboration will be essential for unlocking the sectors full potential and driving sustainable growth.

Financial Snapshot: -

Despite a challenging macro-economic environment and geopolitical tensions during the year under review, our performance showed significant resilience and growth. Our revenue from operations reached Rs. 633.41 crores in FY24. The EBITDA margin improved significantly to 13.91%, with EBITDA standing at Rs. 88.10 crores in FY24. This improvement was driven by enhanced operational efficiencies, the expansion of our own fleet of TEUs, and the broadening of our service offerings new geographic regions, resulting in an increase of 320 bps. The number of shipments during the year was 84,962, slightly lower than the previous year due to increased lead times caused by the Red Sea crisis. Profit after tax (PAT) stood at Rs. 58.37 crores in FY24, with PAT margins increasing by 280 bps to 9.21% in FY24.

Cautionary Statement part of this Report may contain certain forward looking remarks with the meaning of applicable Securities Law and Regulations. Many factors could cause the actual results, performances, or achievements of the Company to be materially different from any future results, performances, or achievements. Significant factors that could make a difference to the Companys operations include domestic and international economic conditions, changes in government regulations, tax regime and other statutes.