Private equity (PE) funds Zephyr Peacock India and Singapore-based Credence Partners have agreed to invest $17 million (Rs.90.4 crore) in 20Cube Logistics for a significant minority stake—the second PE investment this year in an Indian logistics firm.
In January, Everstone Capital invested Rs.220 crore in New Delhi-based Transpole Logistics Pvt. Ltd.
Logistics activities in emerging markets such as India are growing rapidly due to strong economic growth as well as because of a shift in global trade lanes from developed to emerging markets, said Sachin Maheshwari, director, Zephyr.
“We want to capitalize on this differentiating factor. We have noticed that big players are focused on the West and developed markets and are just beginning to look at emerging markets. 20Cube is already a leading firm in developing economies,” he said.
20Cube offers international transportation and contract logistics services in India, Australia, Sri Lanka, Bangladesh, Malaysia, Singapore, China, Uganda and Dubai.
For Zephyr, the investment is its 12th in India and its first in the country’s logistics segment.
The PE firm will assist 20Cube’s management team in strategy and business and management development. After the investment, Maheshwari and Credence’ managing partner Tan Chow Boon will join 20Cube’s board.
“We are glad to have found the appropriate private equity funds to partner with us through our journey. Our team is now complete,” said Mahesh Niruttan, chief executive, 20Cube.
India’s logistics sector has been on the radar of PE funds for a while now. They invested $280.9 million in 14 domestic logistics firms last year, up from $195.3 million in 10 firms in 2011, according to estimates by VCCEdge, which tracks investment activity in the country.
The largest PE deal in the sector last year was General Atlantic Llc.’s $104 million investment in Fourcee Infrastructure Equipments Pvt. Ltd.
The increasing interest can be attributed to the fact that logistics companies have realized they can’t be mere transporters and are, therefore, becoming less asset-heavy and offering more services.
Also, there has also been significant PE interest in the transport infrastructure segments as the policy framework is friendlier than in sectors such as roads and minor ports, said Bharat Banka, chief executive, Aditya Birla Capital Advisors Pvt. ltd, adding his firm is evaluating investment opportunities in domestic logistics firms.
“Customer acquisition can be at multiple stages,” he said, adding that regulations in logistics are not unnecessarily difficult to comply with. “It takes lesser time from ground to launching a service. The only issue here is execution.”