Mumbai: Barely four months after acquiring a Chinese logistics company, Mumbai-based Direct Logistics India Pvt. Ltd has zeroed in on another Chinese firm that offers transport services, including cargo warehousing and distribution, for acquisition.
Direct Logistics facilitates exports and imports by sea and air, popularly known as freight forwarding. It had late last year bought China-based Shenzhen Dida Logistics Ltd for an undisclosed amount, making the first ever acquisition by an Indian company in the Chinese freight forwarding industry.
Direct Logistics’ financial adviser, Ambit Corporate Finance Pte Ltd, is in talks with a few international and domestic private equity firms for arranging funds for the company’s new acquisition.
“We are looking at buying out a supply chain management company in China which will help us in transforming to a complete logistics solution company instead of just freight forwarding firm,” said Sunil Devrani, chief executive and managing director of Direct Logistics. He declined to disclose the target company and the prospective investors in Direct Logistics.
Devrani said the fund-raising and acquisition would conclude in next three months.
Other Indian logistics companies are also making acquisitions abroad to expand their offerings. In 2007, Mumbai-based Shreyas Shipping and Logistics Ltd had acquired a 51% stake in Sri Lankan transportation and freight forwarding company Haytrans Ltd for an undisclosed amount. Yet another Mumbai-based company, port logistics provider Allcargo Global Logistics Ltd, had acquired ECU Hold NV, a Belgian cargo transportation company, strengthening its cargo transportation across the globe. Blackstone Group Lp. and its affiliates have recently picked a 10.38% stake in Allcargo. Sical Logistics Ltd, a Chennai-based logistics company, is also looking at acquiring a freight forwarding company abroad.
Samir H. Kanabar, associate director with global tax advisory services firm Ernst and Young, said India’s transport infrastructure was not coping with the speed of domestic logistics companies’ growth though these players were blessed with the know-how and getting enormous support from various international governments for their expansion programmes or acquisition.
“Indian companies are becoming more aggressive in setting up base overseas since they have skill and human capital. As the companies are facing infrastructural challenges in expanding in India, an overseas acquisition would give these players to spread into new areas,” said Sudhir S. Rangnekar, managing director and group CEO, Sical Logistics.
Mithil Pai, group chief financial officer of Direct Logistics, said international clients were increasingly demanding one-stop solutions for cargo transportation.
“Moreover, the margins are better in supply chain management than in freight forwarding that is more short-term in nature,” Pai added.
Devrani of Direct Logistics said the company was keen on cross-border logistics and wanted to open offices in all Asian countries that have ports. According to him, Direct Logistics was the lone Indian logistics firm to be awarded a “Class A” licence by the Chinese government for executing cargo transportation without owning a ship. “We have plans to open 8-19 offices in China. We will enter into Europe and the US after saturating the Asian market,” Devrani added.
Sidbi Venture Capital Ltd, the venture capital arm of Small Industries Development Bank of India, has recently picked an 11% stake in unlisted Direct Logistics, which is expected to register a turnover of Rs120 crore this fiscal year. The company’s turnover was Rs65 crore in fiscal year 2007. It plans to go for a stock exchange listing in 2010.