Mumbai: The financial services company of the Future Group, Future Capital Holdings, will launch its logistics fund in March in a move that will help the group’s flagship company, Pantaloon Retail India Ltd, India’s largest listed retailer, and other retailers looking for modern storage infrastructure as they expand across the country.
The fund will invest between $700 million and $1 billion to set up warehouses across India’s seven key metros in two-three years.
This investment vehicle will be the largest in Future Capital’s portfolio, which includes three other private equity funds. A hospitality fund is in the pipeline.
Creating space: Future Group CEO Kishore Biyani. The group’s flagship company and India’s largest listed retailer, Pantaloon Retail India Ltd, will likely be an anchor tenant at the planned warehouses. (Photo: Hemant Mishra/Mint)
The fund will be set up through a 50:50 joint venture between Future Capital and US-based logistics and real estate investment company Realterm Global that manages $2.5 billion in North America.
The joint venture will be called Realterm FCH Logistics Advisors Pvt. Ltd and will be led by Brian Oravec of Realterm, who is Mumbai-based.
According to Oravec, the fund, which will have $350 million in equity and the remainder in debt, is expected to return to investors around 25% after taxes and fees.
The fund will invest in setting up 18-22 million sq. ft of warehouse space across India. “The sites have been identified in all target markets and as soon as funding comes in we will move towards closing (the deals),” Oravec said. Pantaloon will likely be an anchor tenant at the warehouses, taking 10-25% of the portfolio.
Realterm FCH will build eight to 10 warehouses, which will also have parking for trucks, petrol pumps, some shops and food. Some warehouses could cater to specific requirements of the food, pharmaceuticals or fashion industries.
While organized retail is growing at around 30% a year and expanding into tier II and tier III cities, the lack of a modern supply chain has been a challenge for retailers.
According to some estimates, around a third of all food goes waste in India because of lack of proper storage. Several retailers and logistics companies are now trying to strengthen distribution networks.
Oravec expects to quickly follow its first fund with two more.
While this is the first warehousing fund in India, there has been a boom in infrastructure private equity funds in the past year. Several of those funds are considering this segment, including ICICI Venture Funds Management Co. Ltd, which will be launching a $3 billion fund, and New York-based Karali Capital Investments Llc., which is raising a $250 million fund.
Future Capital will list on the stock exchanges on Friday, weeks after its Rs4,900 crore initial public offering was subscribed 133 times.
Future Capital has a $425 million Indivision fund, which buys stakes in consumer businesses; a $350 million Horizon fund, which is setting up mixed-use developments; and a Rs350 crore Kshitij fund, which is setting up 11 malls in tier II cities.
Future Capital has also said it will have a $200 million fund to set up hotels.