Mumbai: DHFL Venture Capital Pvt. Ltd, a subsidiary of Dewan Housing Finance Corp. Ltd (DHFL)—India’s third largest home finance company—will partner US-based Redwood Capital Partners Llc. to float a private equity (PE) fund that will invest in logistics and warehousing companies, a senior company official said.
“We had discussions with Redwood for over a year and have now decided to start a PE fund with equal participation,” Arun Goel, CEO of DHFL Venture Capital, said. The venture capital firm currently manages a $47 million (Rs224 crore) fund that invests in property. “...the market is turning around and we plan to raise money in a couple of months,” he said.
Logistics gains: Kapil Wadhawan, DHFL chairman and MD. Ashesh Shah / Mint
Goel declined to indicate the initial size of the proposed PE fund, but DHFL chairman and managing director Kapil Wadhawan said he planned to “scale up the fund to Rs3,000 crore in three-five years”.
DHFL owns 55% in the venture capital outfit, the rest being held by the Wadhawans, the promoters of the housing finance company. The Wadhawan family also has interests in retailing through a chain of grocery stores.
Redwood is a five-decade-old real estate investment firm that has invested at least $8 billion in commercial real estate, according to its website. Redwood managing partner David Carlson did not respond to an email questionnaire from Mint. Redwood has a representative office in Mumbai.
Retailers depend on logistics and warehousing companies to manage their supplies. The market is currently dominated by small and unorganized players, but that is likely to change in sync with the growth of modern retail in India.
Mahesh Chhabria, partner at PE fund 3i India Pvt. Ltd, said logistics is a “subscale business” though there are many players. “It is a potential business to invest in, as supply chain logistics is the backbone of any manufacturing sector. We have evaluated some proposals, but have not found any worthwhile to invest (in),” said Chhabria, whose fund has invested in Mundra Port and Special Economic Zone Ltd and Adani Power Ltd.
Wadhawan said the group’s retail chain could be one of the biggest beneficiaries of the PE investments in logistics and warehousing. Wadhawan Food Retail Pvt. Ltd owns nearly 200 food and grocery retail outlets under different brands—Spinach, Sabka Bazaar and Sangam Direct, a full-line grocery home shopping service. The retailing firm has shuttered some of its stores, renegotiated lease rentals and introduced private labels, and will build efficiencies with its own warehouses. Private labels are usually cheaper than mainline brands and are produced by store owners to attract customers.
“We will not pursue very large formats, but will roll out stores...(of) 10,000-15,000 sq. ft. It will take 18 months to make net level profit,” he said.