Mumbai: The Mahindra Group is planning to hive off its logistics division, Mahindra Logistics, into a different company and will invest at least Rs1,200 crore for expansion of the business.
Mahindra Logistics is also in talks with international players in similar businesses for investing and exploring joint venture possibilities.
A senior executive of the group’s flagship Mahindra & Mahindra Ltd, on condition of anonymity, said the process of separating the logistics division is aimed at unlocking shareholder value and better operational efficiency.
Anand Mahindra, vice-chairman, Mahindra Group
“We are also looking at possibilities of offering some shares to public and listing on the stock exchanges in future,” he said.
A Mahindra & Mahindra spokesperson declined to comment.
Led by Anand Mahindra, the Mahindra Group’s flagship is tractor maker Mahindra & Mahindra. Other business interests include automotive components, trade and financial services, information technology, infrastructure development and resorts. The group, which recently began selling passenger cars, employs 40,000 people and has annual combined revenues of $4.5 billion (Rs17,865 crore).
Several of India’s large conglomerates typically have a logistics division to handle in-house and external transportation business. These companies include Reliance Industries Ltd, the Reliance-Anil Dhirubhai Ambani Group and the Tata Group.
But as the Indian economy continues to grow at near double digit rates, the demand for logistics, as well as the sector itself, is rapidly increasing.
According to consultant firm KPMG, India is spending around Rs4 trillion annually on logistics.
“Separating of logistics business will give sharp focus to company. Moreover, an international partner will bring in investment and expertise for Mahindra Logistics,” said a Mumbai-based analyst, who is not authorized to be named in the media by his firm.
Recently, the Future Group, which run’s the large retail chain Pantaloon, also separated its logistics division into an independent entity.
Until now, “we were serving only our own group, but in three months from now, we will be offering logistics services to all other customers,” said Anshuman Singh, CEO of the new company, Future Logistics Solutions Ltd.
Mahindra Logistics already offers contract logistics and handles corporate employee transportation services for others. Under contract logistics, the company handles transportation requirements of specified projects for other companies, while the latter offers people logistics mainly to information technology and outsourcing companies.
In 2000, Mahindra had set up the unit to meet in-house requirements, but later extended its services to external clients, who now total around 185.
“The international joint venture partner will help Mahindra Logistics to expand its global network...” the company executive said. He said the company is also planning to start a cold-chain business, used for transporting perishables, besides fleet management for other companies.