Logistic sector is the new favourite of private equity (PE) as Blackstone, IDFC, Reliance Capital are busy signing deals and acquiring stakes across logistics companies.
Moreover, firms like Biyani's Future Capital and ICICI Ventures are also busy launching dedicated funds for investing in logistics.
Future Capital's logistics fund worth $700 million to $1 billion will set up warehouses across India and ICICI Ventures' new fund of $3 billion is setting aside money for logistics companies.
According to a report by Venture Intelligence, the investments in shipping and logistics accounted for 22 per cent of total deals by number and 11 per cent of the deal value in 2006-07.
“There is a big demand for infrastructural development and transport is an integral part of it and returns too are good,” said Luis Miranda, President & CEO, IDFC Private Equity Co Ltd.
Increased investment in infrastructure is creating demand for investments amongst the logistics players. Private equity is turning out to be the most favoured way of raising money because it is a long term funding.
“The money comes in as a form of a equity base instrument, which therefore means as a manager I don’t have any debt on my head. With this I am able to leverage and get more debt out of that so therefore it gives me more ability to be able to expand much largely then I can,” pointed out Anil Devli, Executive Director, Shreyas Shipping & Logistics.
Apart from this PEs also bring to the table better corporate governance and skilled manpower, which helps the logistics companies in improving efficiencies and increase the scale of operation.
Even in the current rough market situation, private equity participation in logistics sector hasn't slowed down and with huge amount of investments committed to infrastructure in future, PE flows in logistics is only going to get bigger.
Source: NDTV Profit