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Private equity funds step up logistics exposure

FDI in retail may be on the backburner for now, but private equity investors are ramping up investments in the logistics sector. The latest in the series of deals is a pact by New York-based private equity fund, India Equity Partners (IEP), to acquire the road operations of Dutch freight major TNT Express in India. While the deal value could not be ascertained, the road transportation business of TNT Express had a top line of Rs 200-220 crore. The segment was registering losses and TNT had been contemplating exiting the business, industry sources said.
The deal comes on the heels of a number of big-ticket transactions in the logistics space. IEP had earlier picked a significant minority stake in Gwalior-based Swastik Roadlines Pvt Ltd, a food cargo supply chain service provider. In April this year, Warburg Pincus had struck one of the biggest PE deal in the domestic logistics space with $100 million investment in Chennai-based logistics firm Continental Warehousing Corporation (Nhava Seva) Ltd, a subsidiary of the NDR Group. Other high-profile deals include an investment of $10 million by Ashmore Alchemy Investment Advisors in Siesta Logistics Corp Ltd and Blackstone’s investment in Allcargo Logistics. Mayfield Fund and Sidbi Venture Capital Ltd too had invested $11 million in Fourcee Infrastructure Equipment Pvt Ltd, with another $10 million coming from IEP subsequently.
Under the latest India Equity Partners-TNT Express deal, which takes effect on December 30, the domestic road transport business of TNT will become part of a logistics subsidiary of IEP. Industry players said TNT Express will continue to offer inbound and outbound India services, via its globally interconnected networks. It will also continue to provide customer-specific special services, especially for the healthcare and service logistics segments. On-the-ground facilities, IT and systems and processes will be supported by TNT Express during the transition process.
According to a recent Cushman & Wakefield report, the Indian logistics industry is expected to grow at 15-20 per cent annually, touching revenues of $385 billion by 2015. The report states that by 2012, around 110 logistics parks spread over 3,500 acres, are expected to come up across the country at an estimated cost of $1 billion. While plans to usher in FDI in multi-brand retail have been junked for now, industry experts see the logistics sector to be a big gainer as and when a decision to push through the reform move is taken.
Source: Business Line

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