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Smart money bets on warehousing

The business of warehousing is turning hot. It has begun to attract smart money from private equity funds, which are busy giving an organised shape to a market whose annual revenues are estimated at around Rs 2,000 crore.

business Updated: Oct 15, 2009 21:21 IST
Devraj Uchil

The business of warehousing is turning hot. It has begun to attract smart money from private equity funds, which are busy giving an organised shape to a market whose annual revenues are estimated at around Rs 2,000 crore.

Growing foreign trade and rising use of container transport are fanning demand for warehouses. Market players say that the estimated demand for about 300 million square feet of modern distribution space over the next five years would require more than Rs 38,000 crore in investments.

“We have invested in warehouse asset class because there is an investment gap due to huge demand for organised, quality and modern warehouses and excellent return on investment in the range of over 25 per cent,” said Ved Prakash Arya, managing director at investment firm Milestone Group.

About 90 per cent of the market is unorganised and roughly 75 per cent of the organised market share is with state-controlled firms. An anticipated demand of nearly 340 mn sq ft by 2015 provides a good early mover advantage for higher returns.

Private players such as TCI, Gati, Blue Dart, Indo Arya, have a small pie of the market, which is increasing as most of them have plans for expansion and acquisitions. Real estate players like K. Raheja, Akruti Nirman and Tata Realty have entered the warehousing business.

“Some of the companies are looking for acquisitions in warehousing space abroad primarily to understand of their business concepts and provide such expertise to their clients in India,” said Bijal Doshi, India Head, EuroMax Capital.