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PE, real estate players to invest in temperature-controlled logistics

Snowman Logistics, ColdEX Logistics and DHL Express are some of the organised players

Aditi Divekar  |  Mumbai 

DHL Express
DHL Express

Investment in the temperature-controlled logistics industry in India is expected to grow at an average 20-25 per cent annually as the segment  begins to look more attractive to and players.

Snowman Logistics, and are some of the organised players in the temperature-controlled logistics industry dominated by unorganised players.

“Since this industry stands on a low base of investment, there is ample scope for growth here starting from warehousing to value-added services,”said Gopal R, global vice-president, supply chain and logistics transformation practice, Frost & Sullivan. “funds that had underinvested in this segment in the past  are now coming into the industry with a longer, 7-10 year, horizon,” he added. 

The industry typically comprises temperature-controlled warehouses and transportation with little value addition. It draws its investments largely from logistics players. firms have refrained from having a strong investment presence because the industry demands high capital investment with no quick return on investment.

players present in the warehousing industry are also eyeing temperature-controlled logistics for deeper and long-term presence. “Warehousing infrastructure is critical and, in fact, at the heart of the temperature-controlled logistics industry. that are into warehousing are also keen to put up cold storage facilities,” said Gopal. 

With and firms targeting different parts of the temperature-controlled business for investment, a new partnership pattern is beginning to emerge within the industry. A typical logistics company looks to high net worth individuals or firms for infrastructure and for partnership.

“This industry is growing at a satisfactory level, but this cannot be a money multiplier option. This is a capex-heavy sector and returns are not overnight. Long-term players make fairly good money,” said Sunil Nair, chief executive officer at Snowman Logistics.

Snowman Logistics reported a loss of Rs 2.22 crore in 2016-17 with its return on capital employed a negative 0.23. This is for the first time since its listing in 2014 that the company has posted a loss. 

Though investment is set to pick up in this segment and growth projections are promising, industry executives said, “have still not figured out in terms of active customer acquisition and, therefore, the pace of investment will be cautious,” said Gopal.
Logistics at work

* to put money in the industry with 7-10 years investment horizon 
* players are investing in the sector for achieving deep, long-term presence in the industry
* Sector marred with inconsistency in investment. 
* Actual investment in the sector dependent on real-time demand indicators

First Published: Sat, September 09 2017. 22:19 IST