Direct Logistics buys Chinese company

Direct Logistics buys Chinese company

Mumbai-based Direct Logistics India Pvt. Ltd, a company that facilitates exports and imports by sea and air, popularly known as freight forwarding, has acquired a Chinese logistics company, Shenzhen Dida Logistics Ltd, for an undisclosed amount.

This is the first-ever acquisition by an Indian company in Chinese freight forwarding industry, which was opened up for competition one and a half years back. A freight forwarding firm is responsible for reserving space in ship or airplane on behalf of an exporter or importer, apart from facilitating necessary transportation. Last year, another Mumbai-based port-based logistics company Allcargo Global Logistics Ltd had acquired ECU Hold NV, a leading Belgian cargo transportation company.

Direct Logistics, which is in the process of setting up its own office in China, is currently into warehouse-to-warehouse international transportation and marine insurance, apart from cargo in and out from the ­country.

Shenzhen Dida, with a turnover of Rs25 crore a year, is focused on freight forwarding, logistics and international transportation. “We have signed an agreement with Shenzhen Dida for acquiring 100% shares," said Sunil Devrani, managing director of Direct Logistics. Shenzhen Dida executives could not be reached for comment. There were no merchant bankers involved in this acquisition deal.

“The reverse trend of Indian companies acquiring international companies has started, though it was overdue. Indian logistics companies need to strengthen their global presence for effective network of cargo transportation. Acquisitions will add value to Indian companies," says Mark Fernandes, chairman of Shipping and Aviation committee of Indian Merchants’ Chamber and former president of Bombay Customs House Agents’ Association.

Sidbi Venture Capital Ltd, the venture capital arm of Small Industries Development Bank of India, has recently picked up an 11% stake in Direct Logistics for Rs15 crore.

“We would be financing the acquisition through internal accruals. To add, we may also explore the possibilities of further dilution of stake for expansion," Devrani said.

According to a shipping expert, who does not want to be named, this acquisition would help in capitalizing the booming two-way trade between India and China. “This acquisition reflects the strength of small Indian companies going global. Several companies are forging alliances with Chinese logistics companies to explore cross trading between India and China. Direct Logistics could leverage trade between China and the US," he added.

The target set for a two-way trade between India and China is $20 billion (Rs79,600 crore) by 2008. The two-way trade, which was $18.7 billion in 2005, is growing at an average annual rate of 32%.

“Shenzhen Dida is strong in handling trade of Southern China and Hong Kong. Besides synergies in our operations, this acquisition would give us strong foothold in China," Devrani said. China would be India’s largest trading partner by 2010, replacing the US, he said. Direct Logistics is expected to post a turnover of Rs120 crore in 2007-08 against Rs65 crore in 2006-07.