BackMahindra Logistics forms JV with IVC to create a new logistics company
Mahindra group firm will hold majority stake in 2x2 Logistics which will cater to the automotive sector
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Mumbai: Mahindra Logistics Ltd and Indian Vehicle Carriers Pvt. Ltd (IVC) have established 2x2 Logistics, a joint venture to cater to the automotive sector.
The Mahindra group company said it will hold the majority stake in the venture, without revealing details about the investment and the stakeholding.
Many logistics companies use an asset-light model, managing the business side, but outsourcing the transport side.
However, 2X2 Logistics will have a so-called assetized model, having its own vehicle fleet rather than using third party transport providers.
According to Sushil Rathi, senior vice-president of Mahindra Logistics, the assetized model offers better control over operations.
The partnership will allow Mahindra Logistics and IVC to further develop and expand their transportation networks, linking the North, West, South and East clusters of production and consumption of automobiles.
“This is the first time we will be significantly assetizing our business by investing in 100 car carriers to begin with, and then ramping up capacity. It will help strengthen our operating capabilities in automotive logistics, our largest target industry vertical, with a clear focus on technology, quality and corporate governance," said Pirojshaw Sarkari, chief executive officer, Mahindra Logistics.
Mahindra Logistics is promoted by Mahindra Partners, a $900 million private equity division of the Mahindra Group.
“2x2 Logistics will allow Mahindra Logistics to build a significant asset base and enhance its pan-India transportation network, leading us that much closer to an IPO (initial public offering) by 2017," said Parag Shah, managing partner, Mahindra Partners.
Mahindra Logistics has been aggressively expanding its business with a focus on multiple industry verticals. In August, it acquired a majority stake in Lords Freight (India) Pvt. Ltd soon after private equity (PE) firm Kedaara Capital bought a significant minority stake for ₹ 200 crore in the logistics company.
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 ₹ 268.8 crore in TVS Logistics Services Ltd in 2012, and PE firm Capital Advisors Pvt. Ltd infused ₹ 220 crore into Transpole Logistics in 2013.
According to a McKinsey and Co. study, inefficiencies in logistics infrastructure cost the Indian economy $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.
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