Pallonji Real Estate is setting up a $600-million investment platform in partnership with a global sovereign fund to enter India’s growing warehousing space, a top company official said.
The Shapoorji Pallonji group firm, which builds luxury to mid-income homes across the country, plans to roll out the new business by April, chief executive officer Venkatesh Gopalkrishnan said in an interview. He declined to name the sovereign fund.
According to two people aware of the development, who spoke on condition of anonymity, the Mumbai-based developer is close to tying up with Abu Dhabi Investment Authority (ADIA) for the warehousing investment platform. The deal is likely to be closed within two to three months, they said.
An ADIA spokesperson declined to comment on the matter.
Out of the $600 million, which will be invested across 4-5 years, the platform will deploy around $150 million within the next two years, Gopalkrishnan said. The remaining investment will depend on the success and progress of the industry segment. The investment platform will construct, acquire or invest in warehousing assets.
“Over the last couple of years, leasing has been quite strong. One reason is because of the goods and services tax (GST), people are consolidating their requirement. Also, we have seen quite a bit of growth in the e-commerce industry, generating the need for more warehouses. We want to capitalize on that," Gopalkrishnan said.
Shapoorji Pallonji Real Estate’s expansion into the warehousing space comes amid concerns over the group’s financial situation. In November, rating agency Icra had downgraded the long-term rating of Shapoorji Pallonji and Co., citing “lower-than-anticipated progress achieved by the company in terms of its deleveraging plans through equity infusion and asset monetisation". The group is currently considering several options, including selling solar power plants and road assets, besides a stake in its water-purifier business, Eureka Forbes, to repay debt. The group is also locked in a legal battle with Tata Group over Cyrus Mistry’s ouster as chairman of Tata Sons.
Yet, the company’s move also coincides with the increased interest in warehousing from other large property developers. Several investment firms and property developers have been looking at either expanding or entering the warehousing and logistics park business in India to capitalize on the growing demand for such spaces led by e-commerce firms and the implementation of the GST two years ago.
It plans to buy land to build warehouses or acquire leased warehouses in Mumbai, Pune, Gurugram, Kolkata, Hyderabad and Chennai.
“We want to focus on major cities and grade-A warehouses and also on bespoke requirements of various companies. We would be buying land and developing them and, in some cases, we may also buy out leased warehouses," Gopalkrishnan added.
Last month, global private equity firm Blackstone Group Inc. formed a joint venture with a Hiranandani Group firm to develop warehousing and logistics parks across the country, marking its entry into the sector.
According to property advisory firm Colliers International, investments into the Indian industrial and warehousing segment is likely to touch $7billion by 2021, as existing players expand their portfolio and new ones enter the market. Since 2017, the Indian industrial and warehousing sector has seen investments of around $3.6 billion.