Quant Mutual Fund Held Small-Cap Stock Enters Strategic Partnership for Container Leasing

India's shipping logistics sector plays a crucial role in the nation’s economic growth, with aspirations to increase waterways transport's share from 6 per cent to 12 per cent by 2025

The Indian markets have begun September on a positive note, with Nifty50 and Sensex reaching fresh all-time highs. However, the indices have since pulled back slightly as the India VIX jumped by 4.5 per cent, indicating increased market volatility.

One noteworthy stock, held by the prominent Quant Active Fund, has recently announced a significant development: Lancer Container Lines Ltd., an integrated shipping and logistics solutions in India, has entered into a strategic agreement with P.T. Map Trans Logistic, Surabaya—a prominent Indonesian company. This partnership involves leasing 10,000 TEUs (Twenty-Foot Equivalent Units and Forty-Foot Equivalent Units) containers. The agreement was signed in the presence of Mr. Khalik Chataiwala, Managing Director of Lancer Container Lines Limited, and Mr. Praful Jha, Director of P.T. Map Trans Logistic, Surabaya.

The management of Lancer Container Lines views this partnership as a pivotal move to enhance leasing activities, thereby expanding its business and boosting shareholder value. This strategic alliance is expected to positively influence the company's financial performance, strengthening its market position and driving overall growth.

Previously, the company unveiled ambitious expansion plans, aiming to increase its TEU capacity from approximately 20,000 in FY24 to 45,000 by FY26. To meet rising demand, Lancer intends to steadily grow its container inventory, adding 200-300 containers monthly. The company is also exploring the acquisition of a new vessel, furthering its goal to become a fully integrated service provider. These initiatives are expected to drive robust revenue and margin growth in the coming years.

Mr. Abdul Khalik Chataiwala, Chairman and Managing Director, stated, “Our focused efforts on expanding our container fleet and optimizing our service routes have led to a significant rise in the number of containers handled. The company’s expanded container fleet now stands at 22,707 TEUs, underscoring our strategic investments in fleet expansion and logistics optimization. In Q1FY25, we added 3,008 TEUs to our existing portfolio. Aligned with our growth strategy, Lancer Container is poised to pursue an ambitious expansion plan, aiming to raise the TEU capacity to 45,000 by FY26. Our strategic positioning in Dubai continues to be a cornerstone of our operational strategy. The company is expanding its reach by exploring new trade routes and transporting containers to multiple destinations where there is demand for cargo.”

Q1FY25 Financial Performance

Lancer Container Lines reported a revenue of Rs. 172.4 crore, EBITDA of Rs. 15.91 crore, and a net profit of Rs. 12.1 crore in Q1FY25. This strong performance comes despite challenges such as rising container shipping rates due to persistent port congestion and a challenging macroeconomic environment coupled with geopolitical tensions. The company’s focus on optimizing operations and seizing market opportunities has enabled it to maintain a competitive edge.

For FY24, the company reported a total revenue of Rs. 646.8 crore, EBITDA of Rs. 88.1 crore (EBITDA Margin 13.9 per cent), and a net profit of Rs. 58.3 crore (PAT Margin 9.2 per cent). The improvement in EBITDA and PAT margins by 320 bps and 280 bps respectively highlights the company’s enhanced operational and financial metrics.

Industry Outlook

India's shipping logistics sector plays a crucial role in the nation’s economic growth, with aspirations to increase waterways transport's share from 6 per cent to 12 per cent by 2025. The logistics market is projected to grow from USD 317.26 billion in 2024 to USD 484.43 billion by 2029, at a CAGR of 8.8 per cent.

The government has launched several initiatives to support this growth, including LEADS, a single-window online platform providing comprehensive logistics solutions. Subsidies, such as a 12 per cent incentive for Indian-built and flagged vessels and support for shipbuilding and repairs, are further boosting the sector.

The Bharatmala Pariyojana scheme aims to develop 35 Multimodal Logistics Parks (MMLPs) with a combined investment of Rs. 46,000 crore (USD 5.5 billion). These parks are expected to handle approximately 700 million metric tonnes of cargo, with 15 key locations slated for Rs. 22,000 crore (USD 2.6 billion) in funding.

India’s goal is to enhance trade competitiveness, improve its ranking to the 25th position in the Logistics Performance Index, and reduce logistics costs from 14 per cent to 8 per cent of GDP by 2028—a targeted reduction of 40 per cent.

Disclaimer: The article is for informational purposes only and not investment advice.