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Li & Fung, 2 other MNCs eye 15% stake in Future Logistics

Three multinational firms are in the race to pick up a 15% stake in Future Logistics Solutions Ltd (FLSL), the logistics and supply chain unit of the Future Group, said an executive with knowledge of the deal.

Hong Kong-based Li and Fung Group, the world’s biggest trade sourcing company, European logistics and distribution operator Logista, and CMST, a Chinese logistics enterprises solutions provider, are competing for a slice of FLSL for about $40 million (Rs186.8 crore), which will be used to finance an expansion plan, said this executive on condition of anonymity because he is not permitted to speak publicly about the transaction.
Kishore Biyani, chief executive officer of Future Group, confirmed that the firm was looking to divest a 15% stake to raise funds for investment.
“We are looking to raise $40 million through private equity,” he said in a telephone interview.
 

The company hopes to raise $80 million over two years, primarily to set up warehouses across India and to buy part of its own trucking fleet, the executive said, adding that the balance $40 million would be raised through debt.

About 60% of the amount from the stake sale will be invested to acquire 10 million sq. ft of warehousing in 12 cities, while the rest will be used in international logistics, distribution services, transportation business and reverse logistics, said Anshuman Singh, chief executive of FLSL.
Apart from large warehouses of 500,000 sq. ft, Future Logistics plans to have about 25 small warehouses in another 25 cities, he said.
Future Logistics is also planning to start its own transportation business within four months. “The company will deploy a large fleet of about 1,000 trucks, out of which 20-30% will be owned by the company,” Singh said. The rest will either be leased or rented, he added.
The company had sales of Rs150 crore in fiscal 2008, and is targeting Rs300 crore in fiscal 2009 and Rs1,500 crore by 2011, the executive said.
Industry estimates put logistics constituting 13% of India’s gross domestic product; organized logistics accounts for about 4%.
Source: Livemint

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