Study of Profitability of a Logistics Company

Topics: Regression analysis, Econometrics, Linear regression Pages: 13 (3642 words) Published: March 31, 2011

Executive summary

This study examines the impact of three factors, namely Sales, Fixed assets and Interest paid on the profitability of a logistics company. Econometric tool of multiple linear regression model was used for analyzing the impact of above factors on profitability of a major logistics company GATI Limited. Based on the financial data of last 10 years 2000-2009 the regression analysis has revealed that profitability of GATI ltd. is significantly affected positively by increase in fixed assets and adversely affected by increase in interest paid. The impact of increase in sales volume on profitability is positive but miniscule. In addition seasonality and trend analysis of quarterly sales for the period Mar-03 to Dec-08 was carried out which revealed seasonality in the sales. Sales in fourth quarter on average were highest followed by third, first and second quarter respectively.

Research Methodology and Data collection

1.To study about impact of various factors on profitability of a logistics company. 2.To find out the seasonality effect in sales of a logistics company. 3.To forecast the sales using trend analysis with the regression model.

Research Design:
Research is exploratory one as the initiative has been taken to carry out the analysis of logistics industry and its various parameters. The analysis and comparison is done by using different econometrics tools and models.

Type of Data:
Secondary Data- Research is done by collecting data by various Secondary resources.

Data collection methods:
Annual report GATI,
Various financial data collection websites e.g.

Data Analysis:
Data analysis has been done using different econometrics tools like MLRM (multiple linear regression model),hypothesis testing, t-test and trend and seasonality analysis etc.

Indian Logistics Industry- Structure and Development:
The Indian logistics industry is estimated at 90 billion USD, of which about 70% belongs to the unorganized sector. The growth rate of remaining 30% of the organized sector is pegged at 20-25% per year. Logistics in the Indian context means providing services such as transportation, warehousing, distribution, order and inventory management. Due to global slowdown and inadequate growth particularly in Europe and the USA, India is gradually emerging as the “Destination hub” for many logistics service providers from across the world. With more and more foreign players making a foray in the market, the Indian counterparts are also gearing up for the challenges, by providing a spectrum of services and offerings. Opportunities

Despite the challenges faced by the logistics industry, it contributed about 11% to the GDP calculation in 2008-09 as compared to 13% in 2007-08. Food and beverages, automobile, construction and engineering, textiles and cement have been identified as the top sectors emerging as well. Market players are looking at initiatives such as reverse logistics, end to end Supply Chain Management solutions to propel growth in the market scenario. The Indian warehousing sector has enormous potential as it is poised to become a $55 billion sector by 2010-11 with around 45 million sq ft warehousing space expected to be developed in the country in next five years supplemented by around 110 logistics parks. Huge opportunities exist in the cold chain market in India. In terms of revenue, the total cold chain market in India as of 2008-09 is worth US$ 475 million and is expected to have an average growth rate of 25%. Infrastructure development is another aspect fueling growth. To facilitate the country’s economic development, the government plans to invest $17bn in transport infrastructure. The government plans to create trade-related infrastructure, envisaging world-class infrastructure for warehousing of various products. Another dimension...
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