Blackstone's Allcargo funding boosts India logistics play

Blackstone's Allcargo funding boosts India logistics play

Allcargo has acquired a large amount of land across India, and the Blackstone funding could help finance any development plans. Photo credit: Allcargo Logistics (Projects Division).

Global investors appear to be seeing more flesh in Indian logistics verticals, as the country’s freight industry gradually evolves from a largely fragmented, opaque mode to a more integrated, technology-enabled environment.

Reflecting that growing appetite, Allcargo Logistics Ltd. this week signed a deal to receive Rs. 380 crore (about $53 million) from private equity group Blackstone to fund its inland logistics expansion program. That’s another big boost for Allcargo, coming close on the heels of it buying 44.6 percent of domestic express logistics leader Gati Ltd.

The intended debt and equity financing from Blackstone will be used for the development of logistics parks in key consumption hubs across India, Allcargo said in a statement. 

“Allcargo will retain a minority stake in the various logistics assets and transfer its debt as it relates to these specific assets to their relevant subsidiaries,” the Mumbai-based company said. “This partnership will help Allcargo’s growing 3PL [third-party logistics] business and enable [multinational companies] and Indian companies to access world-class warehousing assets.”

Allcargo said the transaction will be completed in phases over the next year, subject to the necessary regulatory approvals and meeting certain performance parameters.

Acquiring land across India

Besides beefing up its mainstay freight forwarding activity via global subsidiary ECU Worldwide, the company has acquired a large amount of land across India and the latest funding could help finance any development plans.

Allcargo said new inland centers already commissioned or in the advanced stages of construction — in and around Delhi, Bengaluru, Hyderabad, Ahmedabad, Pune, Mumbai, Hosur, and Goa — make up a total 6 million square feet of “Grade A” logistics space, with another 3-million-square-foot development in the planning process.

The company also said approximately 80 percent of its warehousing stock is pre-leased, thus already realizing a return on investment.

“The Indian warehousing sector is scaling an expansionary curve backed by a robust regulatory environment and government thrust in boosting manufacturing, e-commerce, and organized retail. This sector has emerged as an attractive investment destination for global investors,” Shashi Kiran Shetty, chairman of Allcargo Group, said. “Through this strategic tie-up, we reiterate our commitment and positioning to create a global benchmark in warehousing infrastructure and provide state-of-the-art warehousing solutions to our customers.”

In the first fiscal quarter through the end of September, Allcargo’s existing inland sites saw volume tick up to 89,145 TEU from 88,604 TEU during July-September 2018, despite subdued demand, data showed.

Blackstone has been looking to broaden its India investment portfolio, encouraged by the government’s accelerated logistics push. A 50-50 partnership deal signed last month with domestic real estate developer Hiranandani Group to jointly build and operate industrial logistics and warehousing assets across India marked the New York-based group’s entry into the country’s logistics space. 

Bency Mathew can be contacted at bencyvmathew@gmail.com.