‘At LEAP India, we are completely driven by automation’
How big is the present size of the palletised load market in India and what is the potential?
The current size of the pallets market in the country stands at Rs 5,000 crore. By the end of 2022, the pallets market size is poised for growth to touch 4.5 million pallets. Many FMCG, beverages and pharma companies, and leading logistic players, private and government warehouses have been modernising their storage and transport solutions. This has necessitated the use of pallets for storage and for transportation of the goods as it is very convenient for handing the material.
Traditionally businesses liked to own assets, but of late the trend is to outsource non core activities. Has this reached a tipping point?
This is the future and the dream of every organisation to focus on their core strengths and work very closely with partners to enable them to run their operations very smoothly. This would continue to grow and India is at a stage where the corporates have to still evolve in a big way to completely outsource their non-core needs of the business. Our Renting of Pallets Model suits this concept and our customers are saving on both capex, manpower in asset management and hassle free operations. We are currently working with more than 200 customers spread across all the sectors. They have just moved part of their operations on this model and we are expecting them to move to palletisation in the next three to five years.
Is the concept of pooling of these services now gathering momentum?
Yes, the concept of pooling and leasing system is growing with respect to our clients. This would not only release the bandwidth of the management and also reduces cost. In the current competitive market small saving will go long way and their products and services will be more competitive and will be available on the shelves of the retailers on time.
Has the big blow for logistics and warehousing that was expected from the implementation of GST been delivered or is it still to make an impact?
GST has actually changed the way goods are stored and transported in this country. The need for vertical storage has risen substantially because of centralisation of warehousing and shutting of multiple warehouses. This has brought in the need for palletisation of storage and transporting of the goods.Vertical storage needs better management of goods in the warehouse. This is possible only with storing goods on pallets, which will in turn make the warehouse management efficient by using forklifts to move the goods in and out of the warehouses. The capacity of the warehouses and quantum of the goods transported are measured in number pallets. This will make the life of the manufacturers and their customers easy in managing their inventories.
GST has really changed the way goods are transported in this country. The transportation of goods has become efficient and can reach anywhere in India in four to five days. This was not possible in pre-GST era. GST has brought level playing field for all the players in the industry and also brought them to mainstream. There is major scope for converting unorganised sector in to organised sector and the country will eventually become data rich to take right policy decisions.
With unorganised segment still accounting or major part of the business, is some amount of consolidation happening?
Yes we are witnessing consolidation in the segment, moving towards better quality wooden pallets and plastic large foldable containers (FLCs). These products have been able to serve several industries saving on their cost and time and further strengthened our client base. Unorganised players are in the business of making low quality and one time usable pallets whereas we are in to providing pallets, which run for 25 years.
In fact there is no much competition in organised sector as we have only two companies in India. There are only seven companies in the world which are into manufacturing of pallets and leasing out. We are one of them.
How automated is the present ecosystem in logistics services in general? How automated is it at LEAP India?
The logistic services segment is moving towards automation as it has become the need of the hour, as post-GST the need for consolidation and large warehouses to store the goods and distribute across the country has become a necessity. Whereas, we at LEAP India, are completely driven by automation as the demand for vertical storage is greatly increasing and the transportation of goods is with the help of forklifts which enables us to save on time and reduce cost. We have our own software called My-LEAP, which helps in managing our assets across India at our customer sites. We have recently implemented CRM for managing customer relations. Lots of large warehouses have modernised their operations and have automated entire movement of goods and many players in India have imported many equipments which can work at any height of storage level in the warehouse. As we are moving towards global standards, the automation is also going up substantially. The savings in automation is also encouraging players to invest more in this.
Presently there are just two players in this domain in the Indian market. How long before more players join the field?
There have been players in the field but longevity depends upon client’s acquisition and investments for the business. We have been lucky as we have managed to get a good market share in a short time and investments in our business by our investors who have reposed constant faith in our business and us. Many domestic players who were in to making pallets in a small way as their additional business have tried their hand at this and were not able to make good progress in this front.
At LEAP, our focus is only on Pallets and FLCs, so we are very successful and we have also got growth capital and funding from banks at the right time which has really helped. I don’t think many players will enter this business as it requires good experience and patience to build this business brick by brick. This is not like any other business where you can build by infusing funds.
Automobile and FMCG appear to be the main user industries. What are the other potential prospects?
While FMCG industries mainly use pallets and forklifts, automobile and pharma industry uses Foldable Large Containers (FLCs) and Foldable Small Containers (FSCs). Apart from them we also have cargo handlers like metal wire mesh, belts and wedges for cargo transport. With over 14 manufacturing centres and 22 warehouses we are serving to over 200 corporate clients from food, beverage, e-commerce, pharma, automobile and dairy industry.
With 5 years history, the company has laid a good foundation. How do you see the next five years?
We aim to double the current pallet size capacity in the next five years and reach out to more clients while also expanding our market share. Further, LEAP India is looking at acquisitions, both in India and overseas, as part of its expansion. The company plans to establish its presence in certain Asian and European countries. However, the proceeds from the current fundraising, which is expected to be over shortly, will be mainly for organic growth. We are at the final stages of closing our third round of funding to the tune of Rs 250 crore equity and Rs 200 crore debt. This will all go in to our expansion.