PE and foreign funds rush to agri-logistics

Private equity players and foreign funds have been showing strong interest in the infrastructure and logistics space in the six months since the new government came to power.

Agri-logistics, warehousing and private freight terminals have been areas, where there have been a lot of deal activities of late.

Some of the prominent deals in the logistics space in recent times included Mandala Capital’s Rs 150 crore investment in Gati Kauser, Temasek’s Rs 250 crore investment in Star Agri and Taro Capital’s Rs 80 crore investment in Shri Shubham Logistics, a gro­up company of Kal-pataru.

“There is a good level of interest in niche segments within the logistics sector, such as cold chain, agri-logistics, warehousing and private freight terminals,” said Manish Saigal, MD of Alvarez and Marsal, a global consulting firm.

About 40 projects have received approvals and more than 20 have been notified in the private freight terminal (PFT) space during this period.

Some of these projects are receiving good interest from international and domestic investors, including PE players.

PE watchers say some PE deals are at advanced stages of discussion. The investors believe the time is right to enter this space and expect some of these ventures to generate 14-15 per cent returns over the next five to eight years.

The government has already opened railway fre-ight terminals for private participation, which has generated strong interest among the private players, especially in the auto and allied sectors.

Agri-logistics is another sector that has generated substantial interest and even seen some transactions.

“A large part of the food produced in India is lost due to poor distribution and storage. A number of companies equipped with advanced technologies and refrigerated vans and warehouses are targeting farmers with procurement, storage and distribution facilities cutting the intermediary costs. This is developing into a strong market with good long-term potential and the sector has started attracting investors’ attention,” Mohit Khullar, director of Equirus capital, who is also working on a few deals in this space, told Financial Chronicle.

PE investments in infrastructure-related firms have quadrupled this year, compared with an average investment of around $250 million in the last two years.

The majority of these investments have not gone into new projects, but towards restructuring of the existing holding or loans.

Raja Lahiri, partner of Grant Thornton, told Financial Chronicle that there had also been substantial interest in rail freight terminals.

“But it will be some time before it picks up in a big way, as contracts have to get rolled out after the tenders are awarded,” Lahiri said.

He said lately some traction in investment was seen in areas like agri-logistics and road assets. “Given the annual revenue streams of road assets, some of the good yield-earning road assets could see fresh investments or transactions,” he said.

The article appeared in the Financial Chronicle. The article can be found here.