Coffee, palm oil and refractories fell under the last two categories and had to be sold fast to get a good price. Operations that required foreign technology and additional funds - like Sical's auto component division - would be hived off into a joint venture. The company exited sugar and the distillery, but the rest remained the same... until 2007

Now Sical will demerge its coffee plantation, vehicle and other dealerships, and building materials trading to Sicagen. The transferred businesses are working capital intensive; they have a total debt of around Rs27 crore and receivables of around Rs160 crore. Sicagen would be able to closely focus on the operations and turn things around.

Menon reckons that the top and bottomline contributions of businesses that the company has exited or is getting out of are Rs270 crore and Rs5 crore respectively. Each one of them needs fresh funds of around Rs20 crore to grow. "It's more prudent to exit them and pump that money into the logistics business," says Menon.

For Sical, the rejig will mean lowering of debt as well as interest costs. The company's total debt is around Rs505 crore, and the total sale proceeds is expected to be around Rs100 crore. Disinvestment of Sicagen businesses will be done gradually. Menon feels that the building materials business has a good future, with a possibility of foreign fund infusion.

The company is expected to register a topline of Rs750 crore for FY07. For the next year, the topline will be between Rs500 crore and Rs600 crore, with a net margin of around 10 per cent. All a result of the proverbial seven year itch? Menon laughs it off: "Intention and actualisation are two different things. A 52-year-old company has to deal with people and legacy issues in a gentle manner," he says with a smile.

The new lean, mean look
Post rejig, a slimmer Sical will be focused on port / bulk, container, inland and offshore logistics. In each of these segments the company has erected huge entry barriers - on its own and through joint ventures. In a few years, Sical should be a major force in rail, road and seaport logistics.

Present in all major ports (Chennai, Tuticorin, Vishakapatnam, Nhava Sheva / Mumbai, Kandla, Haldia, Paradip, and Goa) and in some minor ports, Sical is the largest bulk cargo handler in the subcontinent by volume. The company offers end-to-end services, including port terminals, port handling, ship agency services, customs clearance, trucking, warehousing, container stations and offshore supplies.

Sical's delivery network includes an exclusive walk-in berth at Chennai for ships carrying bulk cargo; a container terminal at Tuticorin; 1.9 million square feet of storage space across over 100 warehouses; an owned and regularly contracted fleet of over 2,400 transport vehicles, and container freight stations at four locations across India.

Sical has a 20-year build-operate-transfer (BOT) contract with the Tamil Nadu Electricity Board (TNEB) for handling coal at Ennore Port, valid through 2022, which involves unloading coal from ships and moving it to the nearby power plant by a conveyor system.

Menon feels that his company has no competition in the inland transport and warehousing segment, because there is no other company in India that offers port to destination services. "Our services are based on SHE (Safety, Health and Environment) and SLA (Service Level Agreement), the prime requirements of corporates," he says.

Mission 2012
As a part of its corporate goal of a $1 billion turnover by 2012, Sical will be increasing its points of presence from 11 to 38. "The growth strategy is to move the top 20 commodities by value and volume," Menon explains. For that, Sical will increase its own truck fleet strength from 450 to 750 vehicles. The fleet on hire will jump from 2,500 trucks to 4,500. It has introduced GPS / GSM systems for tracking high-value cargo trucks on a real time basis, and is in discussions with automobile manufacturers to provide end-to-end freight solutions.

The company's warehousing services are mainly used by Southern Petrochemical Industries Corporation Limited (Spic) for storing, packing and delivering fertiliser bags to dealers. Sical has 103 warehouses under its fold in the four southern states. In a strategic tie-up with the Central Warehousing Corporation (CWC), Sical manages its container freight stations (CFS) at Tuticorin and Vishakapatnam. However, with increasing competition, it has had to cancel the contract to manage CWC's Noida CFS. Group company Sical Distriparks Ltd manages CFSs at Chennai, Vishakapatnam and Tuticorin. It has a three-year contract with Maersk. "Two more long-term contracts are on the anvil," Menon adds.

In offshore logistics services, Sical has an ONGC contract for operation and maintenance of 15 vessels. The company's own vessel has been chartered for another company. Its wholly owned subsidiary in Singapore, Bergen Offshore Logistics Pte Ltd, targets global offshore energy service providers. The company plans to add more offshore supply vessels and dredgers to its present fleet of one vessel, the Sical Torino.

Big ticket to ride
Sical is also investing on its own and partnering with others in new infrastructure projects, with a total outlay of around Rs1200 crore. The new projects are:

These projects will have a mix of debt and equity; Sical's portion of equity investment will be made out of internal accruals and a fresh capital issue. The company plans to raise Rs116 crore shortly.

The container train project will be operated by an SPV, the Container Rail Company Ltd, with a licence to operate container trains on an all-India basis. The route map indicates that the trains will run in the JNPT - Nagpur - Vishakapatnam - Bangalore - Secundarabad - Tuticorin - Chennai sectors. "In five years time we will operate 17 trains per day," Menon says optimistically.

The company has already paid the licence fee of Rs50 crore to the Indian Railways. The remaining Rs325 crore would go towards developing rail sidings at inland locations, container depots and investments in container rolling stock and handling equipment. The proposed terminals will be operational by 2008.

Menon expects a delivery of two rakes (45-bed flat trains) sometime in June or July, which cost around Rs13 crore per unit, and can carry 90 20-foot containers. The company has acquired a 10 acre plot in Chennai and Bangalore for setting up the infrastructure.

The Nagpur rail-road container terminal will come up on 24-hectare plot, with a capacity of 1.5 lakh TEU (20-foot equivalent units) per annum. The BOT project, which is expected to be operational in FY09, will have an initial capacity of 50,000 TEU. Sical will hold 51 per cent in the SPV Sical Gupta Logistics Ltd. The other promoters - Gupta Coal India Ltd and Maharashtra Airport Development Company Ltd will hold 23 and 26 per cent. Mainly a CFS with neutral rail siding, it will handle infrastructure for export-import / domestic bulk and containerised cargo, and will be built in phases, in line with client needs and Sical's own container train requirements.

In Sical's home state of Tamil Nadu, the Ennore Port has decided to award the building of an iron ore terminal to a Sical-led consortium. The Rs330 crore project is expected to be ready by 2009. The other home investment is the building of a container terminal in Chennai Port, partnering with Port of Singapore Authority (PSA). The Rs492 crore project will be implemented by a JV, Chennai International Terminal Private Ltd, in which PSA will hold 60 per cent and Sical 40 per cent, breaking the monopoly enjoyed by Chennai Container Terminal (P) Ltd so far.

And about the cold chain project, Menon says, "The idea is to store items like mushrooms and other cold-weather-grown products." The business will be started on a small scale and scaled up depending on the market. The rationale is that Sical will take care of moving the items. "Certainly we aren't going back to the old days of disparate business lines," Menon concludes firmly.