Investors show renewed interest in Indian cold chain logistics providers

Mumbai, India: Private equity firms are keen to invest in logistics companies says Manish Saigal, executive director and national industry head of transportation and logistics at KPMG India.

“A good number of deals in the sector concluded in the (current) financial year, and a healthy number of deals are in the pipeline, reflective of the strong private equity interest in the sector,” he says.

Buyers are more flexible and receptive to smaller deals helped by state incentives for the sector in this year’s budget. Finance Minister Pranab Mukherjee unveiled plans for 15 or more mega-food parks in the country. The budget also extended infrastructure status to storage and transportation facilities, in addition to the mega parks, making these a more lucrative investment option.

“Many logistics players are now expanding into cold chain, so the opportunities to invest are increasing,” said Vishal Sharma, founder and CEO, Tuscan Ventures, a private equity firm focused on logistics, citing examples of companies such as Transport Corporation of India and Gati that are expanding into cold-chain storage and distribution.

Investors also attribute the increased interest to transport companies expanding into logistics services becoming “less asset heavy” and offering more services.  “These companies have begun to move towards providing third-party logistics,” said Shruti Gupta, vice president, private equity firm Tano India Advisors .

“They have started evolving, so though a significant part of their revenue is trucking, there is a mix now of other services (in their revenue),” she said. Deals in this space typically are $7m to $15m in size, she says.

The cold chain segment of the logistics sector is expected to see significant buoyancy in investment as the twin strands of market strength and policy benefits converge, Mint reports.

“Besides, the anticipation around the full opening of the sector, that is expected to see a number of global retailers set up shop in India, makes it further attractive,” says Gautami Seksaria, founder and partner, Supply Chain Leadership Council, which conducts business events for the logistics and supply chain sector.