TVS Group plans to raise ₹350- ₹400 crore by selling about a 20% stake in its logistics and warehousing business to private equity investors, said two people aware of the development, requesting anonymity.
TVS Industrial and Logistics Park (TVS ILP) Pvt. Ltd has mandated Mumbai-based investment bank Avendus Capital for the transaction, said the first person, adding that the company is seeking valuation of ₹2,000 crore. TVS Group currently owns 50% of TVS ILP.
An email query to TVS ILP’s alternate director Ravikumar Swaminathan on Monday regarding its fundraising plans did not elicit any response.
An Avendus Capital spokesperson declined to comment.
Founded in 2005, TVS ILP is one of the few organized companies in the fragmented logistics parks, industrial facilities, and engineering, procurement and construction (EPC) space in India.
The scale of operations has almost tripled in the past couple of years, according to the company’s website.
With projects across locations and in various stages of development, TVS ILP is on track to execute 15 million sq. ft by 2021, it said.
The fundraising plans come at a time when logistics, particularly warehousing, in India is growing at a robust pace on the back of increasing leasing activities, which has kindled interest among private equity investors.
There have been several investments in the warehousing industry in the past couple of years with funds, such as Canada Pension Plan Investment Board (CPPIB) and Warburg Pincus, partnering with developers to create large platforms. Activity in the warehousing space has intensified after the implementation of goods and services tax (GST), with several investors announcing plans to deploy hundreds of millions of dollars to build grade A warehousing projects, besides acquiring existing assets.
Currently, the domestic manufacturing sector accounts for 80% of the warehousing market.
According to Knight Frank’s India Warehousing Market Report 2019, the total warehousing space, estimated to be 739 million sq. ft in 2019 for the manufacturing sector, is projected to grow at a compound annual growth rate (CAGR) of 5% to 922 million sq. ft by 2024.
The growth potential has attracted several global institutional owners and operators of industrial parks, including Sydney’s Logos Group, Ascendas-Singbridge Group and e-Shang Redwood.
Institutional investors, as well as developers, have collectively invested over $6.8 billion since 2014 in the warehousing sector with an average investment of $282 million per deal, according to Knight Frank.
“Given that a vast amount of space within this sector continues to be unorganized, there is high untapped potential with greater scope for growth opportunities and better ROIs (return on investments) in the long-term," said Shobhit Agarwal, managing director and chief executive, Anarock Capital.
“There is still a lot to be done in warehousing. A lot more brands today are becoming direct-to-consumer, and not opening retail stores at all. Hence, this will lead to an increasing demand for warehousing. Second, cold and agri chains are still under-penetrated and a lot of capacity needs to be created there.
So, in many ways, we are just scratching the tip of the iceberg," said Abhishek Goenka, chief executive, Cowrks, a co-working space provider. “Third, technology will play a big role, not just in trucking, but also in tracking product at warehouses and at the retailers’ end."