Homegrown PEs to bet on logistics due to demand from e-commerce firms

After global PE funds, it is now turn of the homegrown fund managers to bet on the logistics and warehousing space.

The reason: Besides the attractive returns in the segment, reforms such as GST which has created a single national market and growing demand from e-commerce firms.

A number of them such as Piramal Capital & Housing Finance, Kotak Realty Fund, Milestone Capital, Nisus Finance and others are looking at investing in the space.

Piramal Capital & Housing Finance, which entered the segment in the last financial year, has invested over Rs 10 billion in JM Baxi Group, Apollo LogiSolutions and Casa Grande, are looking to invest more in the segment.

Kotak Realty Fund is looking to buy leased warehouses and under construction properties and co-develop such centres with developers, sources said. The fund manager is also looking to lend secured mezzanine debt to developers.

When contacted, a Kotak Realty Fund executive said they are looking at opportunities in warehousing space. Another Mumbai-based fund manager Nisus Finance has set up a Rs 1 billion corpus consisting of private investors to invest in logistics and warehousing facilities.

Milestone Capital is looking to invest from its Rs 2 billion office property fund to invest in logistics centres, said Rubi Arya, vice chairperson at Milestone. “We will co-invest with the high networth investors and institutional investors. There is a lot of interest from institutional investors,” Arya said.

Milestone is in talks with e-commerce firms to build to suit warehouses, she said. Though Milestone was looking to launch a separate Rs 10 billion logistics fund, it changed the plans later.

Shobhit Agarwal, managing director and CEO at ANAROCK Capital said,” Post GST implementation, the focus on developing Grade A warehousing and logistic spaces has picked up and is increasing consistently. Going forward, demand for such spaces will increase at a high rate, which is why it is seeing such high interest from domestic and international investors”.

Better returns

Domestic Investors are betting on better yields and leases in this segment as yileds are falling and upside is limited in office properties. 

“In industrial real estate, the cap rates are at 10 per cent and leases are long, upto 20 years. This will help in better leverage on the properties and higher loan to value ratio,” said Rituraj Verma, partner at Nisus Finance. 

Verma said rents in logistics centres have gone up. “We expect it to go up to Rs 24 within a year to two,” he said.

Global funds such as CPPIB, Warbug Pincus have already committed billions of dollars for logistics segment in the country. In May 2017, IndoSpace and Canadian pension fund manager CPPIB created a joint venture, IndoSpace Core, to acquire and develop logistics facilities in the country. CPPIB has made a commitment of around $1 billion towards IndoSpace’s assets.

Singapore-based Ascendas-Singbridge Group announced a joint venture with Firstspace Realty, in June 2017, to set up industrial logistics and warehousing centre. 

They jointly aim to invest $600 million over the next five to six years and develop around 15 million sq ft of space.

In August, LOGOS Group and Assetz Property Group, based in Sydney and Singapore, respectively, partnered to set up a logistics and warehousing platform that would invest to develop logistics and industrial parks in the country.