Deal talks between Embassy, logistic firms hit an impasse on valuation

Deal talks between Embassy Industrial Parks, a joint venture between Bengaluru-based Embassy Group and US-based private equity fund manager Warburg Pincus, and logistics firms ESR and IndoSpace have hit a roadblock due to disagreements on valuation.

“Though term sheets were signed one after another, the talks did not materialise due to differences on valuation,” said a source in the know. The JV was looking to monetise the businesses, completed and under-construction assets, at an enterprise value of Rs 1,700-2,000 crore. The source said the gap between the bid and ask price was well below 10 per cent.

Neither the Embassy spokesperson nor the ESR spokesperson offer any comment. An email sent to Indospace did not elicit any response. Warburg Pincus could not be contacted. 

Warburg Pincus has 70 per cent in the joint venture while Embassy has 30 per cent. The venture was set up in 2015. The capital markets team of property consultant Anarock is helping Embassy Group in the proposed deal.

Embassy Industrial Parks is developing warehousing projects at Chakan in Pune, Sriperumbudur and Hosur in Tamil Nadu; Farrukhnagar and Bilaspur in the National Capital Region; and Kothur in Hyderabad.

The portfolio of the JV is 15-16 million square feet, of which 4 million square feet is operational.

IndoSpace is backed by GLP, a global investment manager and logistics and real estate technologies firm, and Realterm, a global real estate operator.

In 2017, IndoSpace Core was established as a joint venture between IndoSpace and the Canada Pension Plan Investment Board (CPPIB), where the CPPIB had committed $500 million for a significant majority stake.

ESR is Hong Kong-based logistics company and is also backed by Warburg Pincus.

Singaporean sovereign fund GIC was in the final round of talks with ESR to invest in the second India-focused logistics fund of the latter, said sources in the know.

Owing to rapid growth in e-commerce and the introduction of goods and services tax, several companies entered the logistics space in the past five years. 

While domestic companies such as Embassy and Welspun entered the field, private equity funds such as Warburg Pincus invested in this area.

According to Colliers International, the sector has attracted an interest from multiple large institutional investors, with investment inflows of Rs 27,800 crore since 2017. Between 2017 and the first half of 2020, the sector garnered a considerable 17 per cent share of private equity investment.