PE Funds Inject $1.1 bn into Logistics and Warehousing in 2 Yrs

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Q1 2019 saw nearly USD 200 mn invested in Logistics & Warehousing in cities like Bengaluru, Chennai, and Pune
Over USD 1.1 bn invested in logistics and warehousing sectors from Q1 2017 – Q1 2019; zero investments in 2015 & 2016
Southern cities of Bangalore, Chennai & Hyderabad see maximum inflows, followed by Mumbai & Pune

Private equity (PE) funds altogether pumped nearly USD 9.7 bn into Indian real estate between Q1 2017 and Q1 2019 – but into more sectors than the ‘usual suspects’ of commercial and residential projects. Logistics & warehousing is a bright new spot on the Indian real estate heatmap.

Infrastructure status, the multi-modal logistics park policy and implementation of GST have caused private equity firms to take a greater interest in the logistics and warehousing sector. Private equity funds altogether pumped in excess of USD 1.1 bn in logistics and warehousing sectors between Q1 2017 to Q1 2019 as against zero investments during 2015 and 2016 combined.

Interestingly, the Southern cities of Bengaluru, Chennai, and Hyderabad saw maximum interest by investors, followed by Mumbai and Pune. The logistics sector had a massive jump-start in the first quarter of 2019 when private equity players pumped in nearly USD 200 mn into cities like Bengaluru, Chennai, and Pune.

There is an immense opportunity, backed by the growing demand from e-commerce businesses in the last two years, and the logistics and warehousing sector is consequently upgrading to higher levels of the organization. This shift is visible in various small Grade B and C warehouses converting into large Grade A warehouses equipped with modern facilities – a transformation that has attracted PE entities from the US, Canada, and Singapore to pump in funds into the sector.

Private equity players have pumped over USD 1.1 bn in the warehousing & logistics sector in the last two years
The otherwise usual favorite of PE funds – residential real estate – saw equal inflows of USD 1.1 bn during the same period

Commercial real estate saw nearly USD 5.7 bn of PE funding in this two-year period

Interest by PE players in logistics and warehousing is currently driven by favorable government policies, strong economic fundamentals, and growth in organized retail and e-commerce. The rapid ramping up of e-commerce activity has caused a corresponding rise in demand logistics and warehousing, in both Tiers I and II markets. Increasing the use of technology will further boost this sector in India as it has globally.

In fact, technology is the fulcrum that will leverage the Indian logistics growth story in the coming years. However, as of today, India is still underleveraged due to the fragmented logistics market. Efforts are on to adopt digital technologies, but only a large-scale digital intervention can unlock this sector’s full potential.

All industry stakeholders, from infrastructure and logistics service providers to e-commerce companies and technology firms, must collaborate to transform the logistics sector that supports e-commerce.

Major Deals

Among the major deals, IndoSpace – India’s leading developer of industrial real estate and warehousing facilities – saw maximum inflow in 2017 to the tune of USD 500 mn from Canada-based CPPIB for projects across cities like Bengaluru, Chennai, Pune, Mumbai, and Delhi. This clearly reflects the increasing confidence of private equity investors within the segment.

Top Deals in 2018

Warburg Pincus invested nearly USD 180 mn in Embassy Group for a project in Bangalore.

Proprium Capital Partners invested nearly USD 100 mn into Musaddilal Projects in Hyderabad.

Top Deals in 2019

LOGOS India invested nearly USD 100 mn into Casagrand Distripark in Chennai.

Morgan Stanley Real Estate invested nearly USD 50 mn in KSH Infra Ltd in Pune.

Embassy Industrial Parks invested nearly USD 50 mn in DRA Projects in Bengaluru.

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