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Warehousing Industry
The Indian warehousing industry is largely unorganized and has huge growth potential across all platforms
Indian Warehousing Industry
8% 36mn sq.ft. 433 mn sq.ft.
92%
398mn sq.ft.
Organized
Unorganized
Modes of transport
Road Rail Water Air
Warehousing services
Godowns Modern Warehouses Express Cargo Hubs LTL transshipment centers Road-linked Logistics and food parks
Inland Container Depots FTWZs Rail-linked MMLPs (Multimodal logistics parks) Bulk-cargo terminals Yards and covered warehouses
Land Acquisition
Preferred phase for structured equity deals as there are restrictions in bank financing for land acquisition Post acquisition, these properties can be offered on a built-to-suit basis for long-term
Instrument Structured equity
Construction
~70% financing needs can be met via debt Remaining 30% is usually financed by the owners or the equity investors This funding is usually locked in at the acquisition stage itself
Operational
Owners can securitize the cash flows of the warehouse for Take out of construction finance or Top-up funding for another project
Exit
Strategic sale is a common exit option at this stage, as the incoming investors offer expertise in owning and managing the warehouses Valuations are yieldbased (cap rate) Cap rate is based on factors such as location, lock-in period etc.
Tenor
Coupon (if any)
5 7 yrs
8 12% serviced yearly
Equity (~30%) Debt (~70%) Equity (5 7 yrs) Debt (7 8 yrs ) 30%+ (part of previous stage) 12% 14%
Tenor
Interest rate
5 6 yrs
11% 12%
Indicative terms
Indicative Terms Structured Equity
Facility Tenor Coupon Expected Investor IRR Convertible Debentures/Convertible Preference Shares 5 to 7 years 8 to 12% serviced each year 30%+ Strategic sale Put/Call Option at the end of tenor Conversion at Floor Valuation defined upfront (could be a fixed number or a conversion multiple) Anti-Dilution Rights with respect to defined Entry Valuation Tag Along/Drag Along Affirmative Rights Interest Rate
Security
Exit
Investor Rights
Clarity on distinction between FDI in real estate and FDI is logistics sectors Upcoming Goods and Service Tax (GST) Proposed Direct Tax Code, under which cold chain/ warehousing facilities will be offered 100% deduction of capital expenditure1
Allowing Real Estate Investment Trusts (REITs), apart from the already prevalent Real Estate Mutual Funds (REMFs)
Development of modern warehouses, instead of the traditional ones which lack optimal size, adequate ventilation/lighting, racking systems and inventory management or technology solutions such as WMS Government thrust on the development of multimodal logistics parks and FTWZs
50mn
1,200 per sq.ft. 120mn 170mn
50
36 86 51%
Additional benefits
Apart from the capital commitment, PE investors can help the investee company By bringing in the know how/expertise of its other global portfolio companies in the similar domain Open doors to newer clients Tap funds from the banks or capital market efficiently Strengthen investee company's advisory committee with seasoned industry experts
Apr-11
Dec-10 Sep-10 Jul-10 Mar-10 Mar-08 Dec-07 Nov-07
Warburg Pincus
India Equity Partners Tuscan Ventures International Finance Corp. IFC Kotak Realty Fund Eredene Capital Kotak Realty Fund
Warehousing
Logistics (Cold Chain) Cold Chain Warehousing Cold Chain Warehouse Services Warehouse Warehousing
100
10 6.5 15 5.4 50 22 7
PE investments have started seeing an uptrend since the dip in 2008 2009
Source: VCC Edge * 2011 deals are up-to-date; excluding AS Cargo-Blackstone deal as it involved indirect investment through takeover of Merill Lynch portfolio by Blackstone
6
Contact Equirus
Mumbai Equirus Capital Pvt. Ltd. Fortune 2000, 4th Floor, A Wing, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051 Tel: +91-22-2653-0600 Fax: +91-22-2653-0601
Disclaimer:
Bangalore Equirus Capital Pvt. Ltd. Raheja Tower West Wing, #1101,11th Floor, MG Road, Bangalore - 560 001 Tel: +91-80-4163-6771 Fax: +91-80-4163-6775
Ahmedabad Equirus Securities Pvt. Ltd. 304, The Grand Mall, Opp. SBI Zonal Office, S. M. Road, Ambawadi, Ahmedabad - 380 015 Tel: +91-79-4050-4050 Fax: +91-79-4050-4060
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