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Charting growth through choppy waters
WHEN Mahesh Sivaswamy decided to uproot his family from Mumbai and relocate to Singapore in 1999, he did not envision building from scratch a shipping and logistics group that rakes in annual revenues of US$300 million.
Yet, having weathered some rough seas in its 20 years, that's where Transworld Group Singapore finds itself today. And it projects revenues of US$350 million for 2019. Despite the tumultuous few years the global shipping sector has had, all seven business verticals of the Transworld group - from ship owning to ship management, feeder services to liner shipping, logistics to inland terminals - continue to thrive.
For this, Transworld's chairman and CEO Mr Sivaswamy credits the group's regional focus, ability to stay nimble enough to seize opportunities, and the strong team at its helm.
In fact, it is very much full steam ahead for Transworld. It is buying more ships and containers, preparing to build more container freight stations in India and has just ventured into an eleventh country with the opening of an office in Dubai last month.
That flurry of activity stands in contrast to what Mr Sivaswamy describes as a "very small, humble beginning" two decades back. He knew, with the move to Singapore, that his goal was to seek opportunities in container shipping - it was his late father's line of business in India. But it took him six months to find his footing.
That first break came from international container shipping company Maersk Line - an opportunity that led him to charter a vessel and start operating a shuttle service between Singapore and Chittagong, Bangladesh. That marked the birth of his first company, feeder operator Orient Express Lines (OEL), in February 2000.
Working out of a small, windowless 150 square feet space at Anson Centre with four people, OEL grew steadily.
Fortuitously, Maersk Line decided that same year to move their base of transhipment operations from Singapore to Malaysia's Port of Tanjung Pelepas and needed a feeder operator. But few operators wanted to move to PTP, as the other mainline operators they serviced remained in Singapore. "We were still a very small company then, we could and so we went," said Mr Sivaswamy.
Growth was exponential. "They wanted us to cover East of India, Calcutta, Bengal - the entire Bay of Bengal region. And we were willing to do that for them, so we kept adding and growing."
Navigating treacherous waters
However, dark clouds loomed. "About 80 per cent of our revenues and retention were coming from a single customer - Maersk Line. That's a very risky situation for any company to be in," said Mr Sivaswamy.
In 2007, Maersk Line put up a tender and OEL lost its contract to Maersk Line's own feeder arm, MCC. They were given a month's notice. "Imagine - the company could have sunk. There were sleepless nights; I thought the company was gone," said Mr Sivaswamy.
What could have been a death knell for the business though, ended up ringing in a new phase of growth.
By that time, Transworld was not merely chartering vessels but had bought second-hand ships too. With the loss of cargo from Maersk Line, these ships were now leaving ports largely empty.
Pushed to a corner, Mr Sivaswamy decided to boldly invest in 300 containers - birthing a new subsidiary, container liner services firm BLPL. "The idea was to fill our ships with our own containers. We would find cargo, help our ships, while OEL continued to work hard to find customers to fill our ships."
It worked. He managed to steer the company to break even within six months and BLPL quickly became an engine of growth. After that initial batch of 300, BLPL invested in another 1,500 second-hand containers in 2008 and kept adding in response to demand. Today, it manages 33,000 to 35,000 containers globally.
But Mr Sivaswamy emphasises that Transworld is not a global operator, but an Asia-focused one. "We operate from North Asia to South-east Asia, to the India sub-continent, Middle East and up to the East of Africa," he says.
And he believes the regional focus has helped shield it from the impact of the US-China trade war and other global headwinds.
"That's affecting global operators, but we are a regional operator. Our business is only growing, because countries where we operate are all growing," he says.
Pursuing growth with new lines of business
Indeed, Transworld's growth in the last decade - both in terms of how it has internationalised and how it has diversified into adjacent lines of shipping-related businesses - has been about going where the growth is.
For instance, Transworld GLS (Global Logistics Solutions), the group's logistics arm, was set up in 2012 to meet growing demand from BLPL's customers for end-to-end logistics services. As BLPL started handling business out of India and into Vietnam and other markets, the group saw value in opening their own agencies in these markets instead of relying on external agencies.
"We went along with what was at that time International Enterprise Singapore (now Enterprise Singapore) understood what we needed, and learned how to open offices in markets abroad," says Mr Sivaswamy.
The idea was to build and propagate the Transworld brand at all the ports its ships were calling at.
Within half a year, Transworld opened several offices in southern China, in Vietnam's Hai Phong and Ho Chi Minh, in Bangkok, in Sri Lanka, and three each in Malaysia and Indonesia. Others, such as its 25 offices across India, were agencies that they bought over and rebranded Transworld GLS.
With the opening of its latest office in Dubai, Transworld GLS now has a presence in eleven countries.
Opportunity has also pulled Transworld further inland and into the business of container freight stations in India. Under its subsidiary, Transworld Terminal, the group runs container freight stations - or huge warehouses for imports and exports - at various locations in India that its ships and feeder services frequent including Delhi, Mumbai, Gujarat, Chennai and Calcutta.
It is now looking at similar opportunities in other markets. For instance, a joint venture in Hai Phong, Vietnam, focuses on cold storage and refrigerated containers and allows Transworld to tap on the strong flow of cargo from India to China, via Hai Phong, says Mr Sivaswamy.
Facing the challenges ahead
While the business remains a capital intensive one, with ships and containers to buy and upkeep, Mr Sivaswamy says Transworld has been able to take advantage of falling prices, particularly in the past five years.
"Ever since Lehman Brothers collapsed, many, many companies have been going down and are willing to sell their ships cheaply. We needed ships, and the price of ships was really making sense to us," he says.
Banks have tended to steer clear of shipping and offshore companies in the wake of the global financial crisis, but Transworld has been able to explain to its bank how it could make use of the situation. "It's the best time to buy when prices are coming down," he says. Transworld now operates a total of 25 ships, eleven of which are owned.
OCBC Bank's managing director, business head, Enterprise Banking Industries, Global Commercial Banking, Lim Ek Meng, says, "With the right expertise, good cost management, and the ability to hold customers first, Transworld Group Singapore has shown resilience and triumphed in its highly capital intensive and cyclical business."
Without a pressing need to raise capital, Mr Sivaswamy does not think a public listing is necessary for now. "I have had discussions, but a public listing does not give the right kind of valuation for our business . . . The traditional method of raising capital is working well for us, the banks are financing us, and thanks to them we have been growing," he says.
One challenge that he does see on the horizon is a spike in bunker prices next year, as stricter shipping laws mandate the use of cleaner and greener oil. The price of oil will rise by at least US$150 per metric tonne, he believes.
But it is an industry-wide challenge, one that all in shipping face, including Transworld's competitors and the mainline operators for whom they will have to raise billings. Mr Sivaswamy remains confident that the team at Transworld will be able to navigate this and other challenges.
The importance of people
"In 2007, that most challenging time for the company when we could have gone down - it was really the people who made it happen. The team we had was very strong. It was a small team, but determined to put in all the effort to turn things around," he says, recalling how employees tirelessly made phone call after call in a bid to fill the empty containers and ships.
In each new location that Transworld has ventured into since, it has followed a standard pattern for managing manpower needs. The top job and the one in charge of finance at each new office would be trusted, long-serving "Transworldlites". All others are hired locally and trained in the company's ways, imbibing its culture.
"Anyone who works in the company for more than 10 years has the ethos. They understand our company," he says.
Today, the group has a total of 1,581 employees globally, of which only about 90 are based in Singapore. "We keep our numbers as low as possible. Singapore is an expensive place," says Mr Sivaswamy.
Hence, Transworld's back-office operations are based entirely in India, which is also where its IT systems are developed, entirely in-house.
Yet, as the group extends its reach across oceans, Mr Sivaswamy is clear that home base will always be Singapore.
"I succeeded in Singapore. My family - all four of us are Singaporeans. The success of these companies under the Transworld group are all Singaporean in nature. So, our headquarters will always be here."