The Indian logistics sector is turning out to be a hot destination for private equity investors, with the government allowing foreign direct investment (FDI) in multi-brand retail.
In a recent development, three private equity (PE) majors — said to be ChrysCapital, Everstone Capital and Tata Capital — have joined the race to acquire minority stake in Delhi-based Transpole Logistics, a Rs 500-crore company with presence across India, China, South Korea and Southeast Asia. Avendus Capital is advising Transpole on the sale of stake.
According to sources in the know, through the second round of funding, PE investor Fidelity Growth Partners would make a part-exit from its investment in Transpole. In April 2011, Fidelity had invested about Rs 60 crore in the company. Through the second round of funding, Transpole is likely to raise about Rs 200 crore.
A mail sent to the Transpole management did not elicit any response. A spokesperson from Avendus Capital said, “As a matter of policy, we do not comment on deal queries.” However, a Tata Capital spokesperson said the company was not doing any such transaction. Other PE firms did not respond to Business Standard queries.
In 2004, logistics professionals Anant Kumar Choudhary, Vivek Shukla, and Praveen Chand Rai founded Transpole Group. In 2010, the group appointed Phillip Ng, former managing director of Fedex Asia-Pacific, as managing director (Far East).
So far this year, the logistics space has seen 11 deals worth $232 million, against 10 deals worth $195 million in 2011, according to data from VCCedge. Since 2007, the segment has recorded 84 deals worth $1.3 billion.
K Ramakrishnan, executive director, Spark Capital Advisors, said, “There is a direct correlation between the economy and freight movement and, therefore, the logistic business. Though this sector is fragmented, with too many small companies, reasonable sizes are being capitalised, as more companies and investors are entering here.”
According to a recent study by Deloitte and the Indian Chamber of Commerce, the market size of the logistics sector in India is $90-125 billion. “Sources estimate the industry employs about 45 million people and is growing at 15 per cent.... Due to its current growth, as well as growth potential, the Indian logistics sector is viewed as one of the most attractive in the world,” the study said. In January, General Atlantic had made one of the largest investments in the logistics space, investing $104 million in Fourcee Infrastructure.
In April 2011, US-based PE major Warburg Pincus invested $100 million in Chennai-based Continental Warehousing. Other major deals in this space include KKR & Goldman Sach’s $53-million deal with TVS Logistics and Blackstone’s investment in Allcargo Logistics.