Reliance Logistics-Concor logistics joint venture — prelude to an acquisition?

Reliance Logistics Pvt. Ltd., an associate company of Reliance Industries Ltd., and the public sector Container Corporation of India Ltd. (Concor) have formed a joint venture company, Infinite Logistics Solutions Pvt. Ltd. The Mukesh Ambani-controlled Reliance Logistics will hold 51 per cent of the shares of the joint venture, and Concor the rest.

The purpose of the joint venture is not very clear. The joint press release issued by Reliance Logistics and Concor says that the joint venture will "provide end to end inter modal logistics solutions to its customers". This is exactly what Reliance Logistics claims it does: "We provide end-to-end logistics solutions to manage the movement of complete range of solids and liquids products through the combination of road, rail and multi-modal routes." Concor does not make such a claim, but the press release says that it is "currently the undisputed market leader in inter-modal transportation in India".

Is this a pointer to a possible acquisition of Concor by the Reliance group? Given the stubborn opposition to privatisation by the Left parties whose support is vital for the continuance of the government in New Delhi, there is little chance of Concor straying out of the public sector anytime soon. The government holds over 63 per cent of Concor''s equity. Over 33.6 per cent of its equity is held by foreign institutional investors, mutual funds, and banks and financial institutions.

But, as and when the government is able to divest its holding in Concor, it will become an attractive strategic buy. Building a joint venture, which will create strong links between the operations of the two promoting companies, may well turn out to be a basis for Reliance to become the preferred suitor for Concor as and when the government decides to part with its control of the company.

The press release says: "Infinite Solutions shall attempt to play the role of the Lead Player in this segment by leveraging the combined strengths of RLPL and CONCOR in the respective areas of logistics and inter modal transportation. While mainly investing in talent, it shall supplement the same by trucking, warehousing and material handling equipment assets to support the vision.

"Infinite shall provide customised and standard containerised transportation by road and rail, distribution and related ancillary services. The expected customer base shall range from manufacturers, traders and retailers from a variety of different industries spread across the length and breadth of India."