Private equity keen on Logistics again Private equity firms are looking for investments in logistics companies once again, after a brief lull due to a mismatch in valuations. Private equity firms, previously, were looking at deals of at least $50 million while smaller logistics companies were interested in smaller deals valued at $20 million or less. 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, said Manish Saigal, executive director and national industry head of transportation and logistics at KPMG India Private Limited. The primary change is among buyers, who now are more flexible and receptive to smaller ticket sizes. An added incentive for investors is the props this sector received in the Union Budget for 2011-2012. Finance Minister Pranab Mukherjee unveiled plans for 15 or more mega-food parks in the country. The Budget extended infrastructure status to storage and transportation facilities, in addition to the mega parks, making these a lucrative investment option. This flexibility will also help entrepreneurs raise equity capital for untested ideas in this sector in the Indian context, said Gautami Seksaria, founder and partner, Supply Chain Leadership Council, which conducts business events on logistics and supply chain management. Some recent transactions that benefited from this change in investors outlook include: - India Equity Partners $10 million investment in Swastik Roadlines; - Ashmore Alchemy Investment Advisors $10 million in Siesta Logistics Corporation Limited; - and, Mayfield Funds and SIDBI Venture Capital Limiteds $11 million in Fourcee Infrastructure Equipment Private Limited, with another $10 million expected from India Equity Partners. This uptick in transaction volume is a welcome change for a sector that saw 11 deals worth $245 million conclude last year, relatively better than the 10 deals worth $182 million in 2009, but not near the 17 deals worth $491 million in 2008, according to Venture Intelligence. Many logistics players are now expanding into cold chain, so the opportunities to invest are increasing, said Vishal Sharma, founder and CEO, Tuscan Ventures Private Limited, a private equity firm focused on logistics, citing examples of companies such as Transport Corporation of India and Gati Limited that are expanding into cold-chain storage and distribution. LCL Logistix India Private Limited, one of Tuscans portfolio companies, is in the process of raising $10 million to $12 million from investors. Investors also attribute the increased interest to the fact that logistics players have realized that they cant be just transporters, and therefore, are becoming less asset heavy and offering more services. These companies have begun to move towards providing third-party logistics, said Shruti Gupta, vice president, Tano India Advisors Private Limited, a private equity firm. 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 $7 million to $15 million in size, she added. At least half-a-dozen logistics companies involved in third-party logistics and cold-chain storage and distribution told Mint that they were in talks with private equity investors for a possible dilution over the next three to six months. There has also been significant deal activity in those segments of transportation infrastructure where the policy framework is firmer and friendlier than in other sectors, such as roads and minor ports, market participants said. While most minor ports have private equity investments already, there have been seven deals in the roads segment in 2010, more than the number of deals in the previous four years put together, according to data from the Supply Chain Leadership Council. Within logistics, the cold chain segment is expected to see significant buoyancy in investment as the twin strands of market strength and policy benefits converge. 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, said the Councils Mrs. Seksaria. Source: Trans Reporter
Posted on: Wed, 16 Jul 2014 06:02:27 +0000
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