Future Group's logistics arm is planning to raise Rs1,000 crore by selling stake either through an initial public offering or private equity placements in the next 15 months.
“This is a capital intensive business and we will raise funds through a combination of debt and equity,” said Anshuman Singh, MD and CEO at Future Supply Chains . “It could be anything – private equity placements, IPO or even existing stakeholder Li & Fung increasing its stake. We will decide the route next year,” he added.
In 2009, Hong Kong-based supply chain giant Li & Fung Group had bought 26% stake in the company for $30 million.
At present, Future Supply Chain gets more than 70% of its Rs600-crore business from servicing retail operations of its parent company. However, the company is also de-risking its business model and tapping other opportunities by adding newer clients across consumer sectors. “In the next few years, our parent company would be contributing around 30% of our total sales with the rest coming from other clients,” added Singh. While a majority of their clients are in the consumer products and apparel segments, their next big focus would be auto and even retail sector. With over 60 hubs, servicing more than 2,600 retail outlets spread across the country, several consumer brands have been outsourcing their entire distribution operations to Future Supply Chain.
The department of industrial policy and promotion (DIPP), which falls under the commerce & industry ministry, has recently proposed to open India's retail market to global retailers with a rider that at least 50% of the total FDI proposed by an investor should be in backend infrastructure. Once that happens, the supply chain sector will attract massive investments from global retailers, including Walmart and Tesco.
However, in a first possible instance of collaboration between Indian retailers, Future Supply Chain has had discussions with home-grown retailers such as Reliance and Aditya Birla's More to service them and handle their back-end activities, said sources. The Boston Consulting Group estimates the size of organised retail market at $28 billion and expects it to grow nine times to $260 billion in 10 years.
Source: Economic Times