Encouraged by the change in FDI regulations, India’s logistic companies are increasingly taking the private equity route to fund their expansion plans.
In the latest development, Mumbai-based end-to end logistic major JM Baxi & Co is engaged in discussions with PE players to raise fund to meet its expansion plans. The management of JM Baxi has appointed IDFC Capital, the investment banking arm of IDFC, to find suitable buyers. Sources said JM Baxi plans to raise Rs 150-200 crore by selling minority stake in the company. The names of PE firms that showed interest in JM Baxi could not be ascertained.
JM Baxi runs services such as a shipping agency, ship brokerage and chartering, bulk cargo operations, clearing and forwarding, container logistics, port development, tanker operations and ship management. Email questionnaires to Krishna Kotak, MD of JM Baxi & Co, and, spokesperson of IDFC, were not answered. Following the government’s decision to allow FDI in multi-brand retail, PE firms are showing more interest in the logistic sector that will benefit by the new regime.
Another logistics major, Delhi-based Transpole Logistics, is also engaged in talks with ChrysCapital and Everstone Capital to raise about Rs 200 crore. The size of the overall logistic deals grew by about 20 per cent this year at $232 million from 11 deals, compared to $195 million from 10 deals last year, and 10 deals worth $73 million in 2010.
According to a Fitch Ratings report, the logistics industry in India is expected to grow at 15-20 per cent a year to touch around $350 billion by 2015 from its current size of $80 billion.
“If the government’s plan to allow FDI in multi-brand retail and the goods and services tax is implemented, corporates are likely to tie up with logistics experts to improve efficiency, leading to a further rise in outsourced logistics,” said the Fitch Ratings report.
Early this year, US-based General Atlantic invested $104 million in Fourcee Infrastructure Equipments Pvt Ltd. Another US-based PE major, Warburg Pincus, invested $100 million in Chennai-based Continental Warehousing Corporation in April 2011.
The $53-million deal by Kohlberg Kravis Roberts & Co (KKR) and Goldman Sachs with TVS Logistics and Blackstone’s investment in Allcargo Logistics are other major PE deals in the Indian logistics space.