Investors ride on new-age logistics players
Several new-age logistics players have raised close to $300 million in the past six months
 "Investors ride on new-age logistics players")
premium
Investor
Last Updated : Apr 06 2017 | 12:41 AM IST
Several new-age logistics players such as Black Buck and Rivigo, Delhivery have raised close to $300 million in the past six months even as e-commerce firms have struggled to raise fresh money.
Black Buck, logistics marketplace by Bengaluru-based Zinka Logistics Solutions, raised $70 million from Sands Capital and IFC in March, after raising $25 million from Tiger Global, Accel and Flipkart in December.
In March, private equity (PE) firm Carlyle pumped $100 million into logistics firm Delhivery, while PE firm Warburg Pincus invested $75 million in Delhi-based logistics firm Rivigo Services in November. Logistics firms have raised a $3 billion since 2007.
Why are investors bullish on logistics firms?
Rajesh Yabaji, co-founder, BlackBuck, says logistics players continue to be one of the largest unorganised industries for the country and, hence, the opportunities to add value are immense.
‘‘The industry is very communication-intensive and infusion of technology in such a sector is the best way to disrupt businesses. The new-age players are trying to solve inefficiencies of this industry, using technology. This is only the start of investments into this sector, the best is yet to come,'' he says.
Disruption of any industry by technology, says Yabaji, has yielded good returns for investors. ‘‘The key characteristics of the industry are more or less the same throughout the world. The success in one country can be replicated in different parts of the world, which offers a great opportunity to monetise the transformation.”
‘‘While logistics has traditionally been a low-tech, high-asset-intensive industry, we have seen the emergence of new-age logistics players that use technology to provide transportation solutions to businesses in the past five years,” Neeraj Bharadwaj, managing director, Carlyle Asia Partners, told Business Standard in an interview last week.
Most of the investments in the past six months have been in newer-age logistics companies, which have been able to address a specific gap in the market (high-speed cargo delivery services, e-commerce delivery, and cold chain). Logistics grows at a multiple of GDP growth, say investors. The growth is driven by multiple supply and demand side factors.
On the supply side, improving public transportation — airports, roads, ports — and storage infrastructure is expected to drive growth. Demand side factors, including increasing consumption, change in consumption patterns to newer products and services (e.g meat products requiring the use of cold chain), implementation of GST and growth in manufacturing, are expected to drive growth.
Logistics in India is a large industry that is projected to generate revenue of $200 billion by 2020 according to estimate, with a few sub-sectors, express logistics, cold chain, warehousing, growing faster and attracting more capital, said Bharadwaj.
‘Apart from the huge demand from e-commerce and other sectors, investors are betting big on implementation of GST. It is expected to lead to re-configuration of warehousing and distribution networks through intelligent consolidation, and will result in faster turnaround times. It is going to be a great opportunity for logistics players to increase scale,” said Nishith Rastogi, co-founder & CEO, Locus.sh, which offers routing solutions to improve last-mile deliveries.
Investors say tech enabled logistics players are uniquely placed to scale rapidly, in a large industry that is highly fragmented with very little technology penetration.