Mumbai: Logistics company Palogix Infrastructure Pvt. Ltd is in talks with private equity (PE) firms to raise up to Rs150 crore to fund its expansion and provide an exit to investor Bessemer Ventures, two people aware of the development said.
“It is looking to dilute a minority stake and has hired Edelweiss Financial Services to advise it,” said one of the two people on condition of anonymity as the talks are private.
Ramesh Rai, director at Palogix Infrastructure, declined to comment. Bessemer and Edelweiss did not respond to emails seeking comment.
Palogix plans to use the funds to expand its network of private freight terminals network from the current five, the first person added.
Private freight terminals are rail-based logistic hubs with facilities such as inland container depots, container freight stations, warehousing and sufficient space for stocking and other related activities.
The first such terminal was commissioned by Palogix at Durgapur (West Bengal) in 2012. The company has four others in Delhi, Kolkata, Rudrapur (Uttarakhand) and Giridih (Jharkhand).
The deal will provide an exit to Bessemer Venture Partners, said the second person, who asked not to be identified.
“Bessemer has been an investor in Palogix for almost six years and is keen on exiting. With the passage of the goods and services tax (GST), there is a strong positive sentiment for the logistics sector, hence it feels that this is a good time to look for an exit,” he said.
Logistics has remained an attractive sector for PE investments as it is considered a proxy for overall economic growth. In the past five years, the logistics space has seen private investments worth around $1.17 billion across 74 deals, according to data from deals tracker VCCEdge.
In 2015 alone, $418 million was invested in the sector, driven primarily by the e-commerce boom.
In February, PE fund Asia Climate Partners announced it was picking up a stake in cold chain logistics firm ColdEX Logistics Pvt. Ltd. In March, Mint reported that logistics firm JM Baxi Group has started talks with PE funds to raise $150-200 million.
The government has said it plans to implement GST by 1 April 2017. The tax reform is expected to be a significant boost for the logistics industry.
On the private freight terminal front, too, the government has been pushing reforms for more private-sector investment. In January, Business Standard reported that in a bid to boost private investment in the rail sector, Indian Railways is aiming to build 500 private freight terminals in the next three years under the public-private partnership model.
In May 2015, Mint reported that the ministry had slashed application fees and one-time charges to attract such deals in private freight terminals.
“With GST coming into play, logistics businesses are expected to see significant growth in the near future. Private equity interest in these businesses is expected to be strong in the future,” said Manish Begrajka, executive director at investment bank Euromax Capital.