Logistics companies plan to build and own warehouses

Posted by Daily Shipping Times on 12-04-2018        Tweet

MUMBAI: Logistics companies are now planning to build and own warehouses and not just lease them, encouraged by the recently conferred ‘infrastructure status’ that makes easier loan access for funding these assets. An estimated $7 billion is likely to be spent on warehouses, fulfilment centres and logistics parks in the next 3-4 years, according to industry estimates.

Apollo Logisolutions, for instance, is planning to build three-four warehouses spanning 250,000 square feet at an investment of Rs 18 crore-Rs 20 crore each, said Vice Chairman Raaja Kanwar recently. The company currently has 30 warehouses across India, all of which are leased.

“As part of our expansion, we are planning to start 6-7 new multi-client facilities (MCF) across major consumption centres in India,” said Gautam Dembla, Managing Director of the Indian unit of FM Logistic, a Euro 1 billion, French company.

Logistics players in India have typically followed an asset-light model under which they lease warehouses instead of owning them. But the recent infrastructure status encouraged them to chart out plans of having a mix of owned and leased warehouses.

Having an infrastructure status significantly cuts down on paperwork and regulatory processes and makes for easier access to credit.

In November, a notification issued by the Department of Economic Affairs (DEA) widened the category of infrastructure sub-sectors to "transport and logistics" from the earlier sub-head of "transport".

According to the notification, logistics infrastructure includes "Multimodal Logistics Park comprising Inland Container Depot (ICD) with minimum investment of Rs 50 crore and minimum area of 10 acre".

A cold chain facility having an investment of at least Rs 15 crore as well as warehousing facility with investment of minimum Rs 25 crore would come under logistics infrastructure.

“Over the next two to three years, India is expected to see a supply of 220 to 250 million square feet, summing the modern warehousing capacity in India to 400 to 450 million square feet by FY21. To achieve this, the sector is expected to attract a capital of $6. 5 to 7 billion, of which 40% of institutional capital has been deployed,” said Prahlad Tanwar, Executive Director at KPMG.