While 2009 was a year of caution for most private equity investment firms, 2010 is looking optimistic especially for the logistics sector, which expects to seal many a deals this year.As 2009 ended with a big-ticket private equity investment of Blackstone putting $245 million in Gateway Rail Freight, Indian logistics industry left behind the cautious approach and braced 2010 with optimism.
Industry expectations are high, to touch a target of 10-12 private equity deals and investments close to $400 million this year, like the buoyant year of 2008 as against only six deals of 2009.
Revival in retail and manufacturing is expected to give a boost to sector specific logistics players. But the fragmented nature of the $10 billion Indian logistics industry, growing at 10 per cent and improving valuations of businesses, will make mergers and acquisitions also a game changer, especially in road and rail transportation.
Manish Saigal, executive director at KPMG, said, “The sector is more amiable to PE but we will see more inbound M&A as foreign companies like NYK, Toll Logistics and Maersk are drafting aggressive expansion strategies in India.”
Experts added that these M&As will also be mostly private equity funded.
Meanwhile, investors wanting to cut deals need to be cautious while finalising targets as asset heavy companies offer longer gestation period and smaller scale becomes a problem for asset light companies.
Nonetheless, a need to create capacity across sectors in logistics offers huge investment potential and investors feel, the time is just turning right.
Source: NDTV Profit