InterGlobe, UPS in 50:50 joint venture to dive into India logistics market

Billionaire airline owner Rahul Bhatia’s InterGlobe Enterprises is foraying into a new business -- logistics and cargo. InterGlobe has formed a 50:50 joint venture with Atlanta-based logistics giant United Parcels Service (UPS).

People aware of the development said that UPS was scouting for a local partner to grow its business in India which has largely stagnated when compared with its global peers like DHL and FedEx. UPS floated a company, Iris Transportation Service, in 2021 in which InterGlobe picked up a stake of 50 per cent around the middle of last year.

Though the spokesperson for the company didn’t respond to queries on the joint venture, a formal announcement is imminent.

Sources said the venture will look to foray into all types of logistics services, including warehouses, transportation and inventory management, and value-added services linked to the conveyance and shipment of goods by air, land, and sea.

While UPS had a joint venture with an affiliate of Jet Airways, since the demise of the latter, the venture was all but dead. India has been on the cards of global logistics giants. 

German logistics major DHL acquired Blue Dart in 2004 and currently holds a 74 per cent stake in the company. UPS’ US rival FedEx last year invested $100 million in logistics start-up Delhivery, shares of which got listed on Tuesday.

“Global logistics companies are eyeing expansion in India, thanks to the significant growth primarily climbing on the demand for e-commerce and also due to the rollout of GST, which has made the supply chain more efficient,” an executive of a logistics company said, adding that global giants require a local partner to negotiate the regulatory challenges. “It makes sense for the likes of FedEx, DHL. and now UPS to have a local partner because the challenges in negotiating Customs duty, and local taxes are better handled by the partner which understands the local business environment,” he said.

The foray of InterGlobe into the logistics sector comes as IndiGo -- in which it holds a 37.82 per cent stake -- has made robust plans to grow its cargo business. The airline is leasing four Airbus A321 freighter aircraft -- the first of which is slated to arrive by the middle of this year.

Analysts tracking the logistics sector said that there are multiple areas where IndiGo’s cargo business can benefit from a joint venture between UPS and its parent firm. “IndiGo operates to 72 Indian airports and also to nearby countries with huge belly space. With this partnership, IndiGo is likely to get access to UPS’ global networks, especially in North America and Europe, while UPS gets access to IndiGo’s wide reach in the Indian domestic market. It’s a win-win deal for both,” an analyst tracking the sector said.

But senior executives of IndiGo confirmed that while there could be possible synergies going ahead, IndiGo’s cargo plan will be independent of the joint venture.