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Private equity funds pump in $1.1 billion in logistics, warehousing sector

The key factors driving PE players' interest in logistics and warehousing are government policies, strong economic fundamentals, and the growth in organised retail and e-commerce

T E Narasimhan  |  Chennai 

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Private equity (PE) funds have pumped in excess of $1.1 billion in the and warehousing sectors between the first quarter of 2017 and the first quarter of 2019, as against zero investment in 2015 and 2016 combined.

Infrastructure status, the multi-modal park policy, and implementation of the GST had all led to PE firms’ greater interest in the and warehousing sectors.

Shobhit Agarwal, managing director and chief executive of ANAROCK Capital, said that Bengaluru, Chennai and Hyderabad saw maximum interest by investors, followed by Mumbai and Pune.

"The logistics sector had a massive jump-start in the first quarter of 2019, when PE players pumped in nearly $200 million into cities like Bengaluru, Chennai and Pune," said Agarwal, adding that there is immense opportunity, backed by the growing demand from businesses in the last two years; the logistics and warehousing sectors are consequently upgrading to higher levels. This shift was visible in various small Grade B and C warehouses converting into large Grade A warehouses equipped with modern facilities — a transformation that has caught the eye of PE entities in the US, Canada and Singapore, to pump in funds, he said.

The key factors driving PE players’ interest in logistics and warehousing are government policies, strong economic fundamentals, and the growth in organised retail and The rapid ramping up of activity has caused a corresponding rise in demand logistics and warehousing, in both Tier-I and II markets.

Private equity funds pump in $1.1 billion in logistics, warehousing sector

Among major deals, LOGOS India invested nearly $100 million in Casagrand Distripark in Chennai, Morgan Stanley Real Estate pumped in $50 million in KSH Infra in Pune, and Embassy Industrial Parks pooled in nearly $50 million into DRA Projects (Bengaluru), in 2019.

Warburg Pincus invested nearly $180 million in for a project in Bengaluru, while Proprium Capital Partners invested nearly $100 million in Musaddilal Projects in Hyderabad.

IndoSpace saw maximum inflow in 2017 — to the tune of $500 million from Canada-based CPPIB, for projects across cities such as Bengaluru, Chennai, Pune, Mumbai and Delhi.

A report by JLL indicated that the annual demand for the logistics and warehousing space of close to 32 million sq ft had outstripped the supply of 31 million sq ft — witnessed for the first time in the last four years.

With the January-March period of 2019 already witnessing absorption of 8.4 million sq ft, it is expected to clock an estimated 38 million sq ft by the end of 2019. Given the high demand, lease transactions have remained high, it added. Besides the rise in transactions, the share of Grade A space leases has also risen in the past four years, it said.

Of the total 32 mn sq ft of industrial and logistics leases in 2018, 56 per cent was concluded in Grade A spaces.

Sectors such as 3PL/logistics, engineering, auto and ancillary, e-commerce, FMCG, retail and telecom, and white goods have remained the biggest demand drivers. As a result of the high demand, the logistics sector is expected to grow to $215 billion by 2020.

First Published: Sat, June 22 2019. 23:09 IST
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