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HomeREALESTATEWarehousing & logistics sector back on foreign PE investment radar

Warehousing & logistics sector back on foreign PE investment radar

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The warehousing and logistics sector in India received a whopping investment of Rs 1,438 crore through two major deals in 2015. This made the overall foreign private equity (PE) inflow into the sector more than even the sum of five deals – Rs 1,350 crore – that took place in 2012. The year 2013 had seen a remarkably low investment. However, government initiatives in making the policy environment conducive and strengthening of the e-commerce logistics platform post-2014, seems to have resulted in an investment comeback – as seen in 2015.

The promise of high growth in warehousing and logistics is luring not only foreign investors but also private equity firms to India. Policies allowing 100% foreign direct investment (FDI) in warehouses and food storage facilities under automatic routes (where manufacturers can sell their products online directly) as also declaring some zones to be tax-free (i.e. free trade warehousing zones or FTWZs), has made the sector appear on the foreign PE investment radar.

Year 2011 2012 2013 2015
Foreign & PE investment (in INR crore) 1,179 1,350 220 1,438
No. of deals 5 4 1 2

Source: JLL whitepaper

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What lies ahead?

Certain measures being taken by the government currently, is expected to lead to big bang growth in the Indian warehousing and logistics sector:

  1. Regulatory improvements: The government plan to improve the regulatory and taxation regime for a globally competitive environment.
  • Rolling out of much-anticipated and debated Goods and Service Tax (GST) in India
  • Single-window system along with easy and simple clearance procedures
  1. Manufacturing thrust: Current thrust in manufacturing will strengthen and re-configure Indian logistics sector all the more and make it live up to global standards.
  • ‘Make in India’ initiative to strengthen the manufacturing base in India
  • Delhi Mumbai Industrial Corridor (DMIC) – infrastructure driven industrial investment corridor
  • Country-specific investment regions and industrial parks on Public Private Partnership (PPP) model – (E.g. Japan to invest USD 35 billion – Neemrana, Bechraji, Supa; China to invest USD 20 billion in next five years; UK – Belgaum)
  1. Connectivity push: Large scale investments in infrastructure sector are set to improve connectivity to every nook and corner of the country.
  • Road: Develop a total of 66,117 km of roads i.e. building 30 km of road a day from 2016
  • Rail: Heavy duty, high speed, extra-wide, doubly stacked Dedicated Freight Corridors (DFC) in west and east India
  • Seaports: Target capacity of over 3,130 MT by 2020 with over 50% anticipated to be generated at privatized non-major ports
  • Airports: Plans to develop 200 low-cost airports in Tier II and Tier III towns.

It will be interesting to see how this sector shapes up given the economic transformation and mega-infrastructural projects underway, apart from changes being made to the regulatory regime. GST implementation will indeed be one of the biggest game-changer and it remains to be seen how soon the Parliament allows its passage.

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Nirav Kothary
Nirav Kothary
Nirav Kothary, National Director – Industrial Services, JLL India


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