Mumbai: Mahindra Logistics Ltd has acquired a majority stake in Lords Freight (India) Pvt. Ltd for an undisclosed amount four months after private equity (PE) firm Kedaara Capital bought a 23% stake for Rs.200 crore in the logistics company.
Mumbai-based Lords Freight is an international freight forwarding company with capabilities in customs brokerage, transportation and warehousing.
Pirojshaw Sarkari, chief executive officer of Mahindra Logistics, said his company has acquired a “significant majority stake” in Lords Freight and he would retain it as a separate entity under the Lords brand, citing its experience and cultural fit. He did not disclose other details.
Mahindra Logistics is looking at raising funds through an initial share sale in 2018.
India’s logistics sector is attracting investors. US private equity firm Kohlberg Kravis Roberts and Co. LP and Goldman Sachs Group Inc. invested a combined Rs.268.8 crore in TVS Logistics Services Ltd in 2012, and PE firm Capital Advisors Pvt. Ltd infused Rs.220 crore into Transpole Logistics in 2013.
According to a McKinsey and Co. study, inefficiencies in logistics infrastructure cost the Indian economy an extra $45 billion, about 4.3% of gross domestic product (GDP), every year. Freight traffic will multiply 2.5 times growth by 2020 from the 2010 levels, further straining India’s infrastructure. The Centre plans to contain its fiscal deficit at 4.1% of GDP in 2014-15, as against 4.5% of GDP in the previous year.
Experts pointed out that this acquisition will make Mahindra Logistics an integrated logistics company.
“Mahindra Logistics is going beyond automotive vertical. Freight forwarding was the missing link for Mahindra Logistics. This acquisition will enable the company to come closer to integrated logistics services,” said a senior Mumbai-based logistics consultant, requesting anonymity. He added that this acquisition is just the beginning of many more such events and a potential initial public offering (IPO).
Mahindra Logistics registered a revenue of Rs.1,750 crore for the last fiscal year and is expected to cross Rs.2,000 crore in the current fiscal.
Sarkari confirmed that his company is in talks with a couple of companies, including a network warehousing company and a transportation company that owns trucks.
“Many of our clients were asking for freight forwarding services. This was missing in our business. Hence this acquisition,” Sarkari said. He said the company is also planning to enter into the agriculture logistics (including cold chain) business as the parent company Mahindra Group is focusing on that business.
The company has plans to reduce its dependency on the parent company for its revenues. Currently, Mahindra Group accounts for around 70% of Mahindra Logistics’ revenue.
“Our idea is to make this to 60% from non-Mahindra Group and 40% from the group before 2018. This is an internal target we are looking (at) before taking the company to capital market with an IPO,” Sarkari said.