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Warehousing Sector

Strictly Private & Confidential

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.


398mn sq.ft.



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

Container Freight Stations

Air Cargo Centres

Port-based yards and covered Express Cargo Hubs warehouses

Tank farms for POL

Warehousing Key phases & the different sources of investment

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

~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

Owners can securitize the cash flows of the warehouse for Take out of construction finance or Top-up funding for another project

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.

Instrument Tenor Expected IRR Interest rate

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%

Instrument Structured debt

Interest rate

5 6 yrs
11% 12%

Expected IRR 30% +

Source: Equirus Analysis

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

Indicative Terms Structured Debt

Facility Tenor Repayment Structured Debt 5 to 6 years Structured according to projected cashflows 1% to 2% below senior construction debt interest rate Corporate guarantee Additional collaterals based on mutual discussions and agreement Charge on security released by Senior debt holders



Other Conditions NOC from existing lenders

Investor Rights

Other Conditions Financial Covenants

A slew of steps need to be taken to encourage FDI in warehousing space

A clearer and conducive policy framework

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

Availability of exit options

Allowing Real Estate Investment Trusts (REITs), apart from the already prevalent Real Estate Mutual Funds (REMFs)

Improvement of current infrastructure

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

Other than acquisition of land or goodwill or financial instruments


How Private Equity can help the Warehousing sector?

Equity investment required in setting up a warehouse
Equity funding (INRmn) Total Land Area 1 lakh sq. ft. Debt funding (INRmn)

Total Land Cost

Construction Cost Total Cost Total Investment Proportion of total investment

1,200 per sq.ft. 120mn 170mn

36 86 51%

84 84 48% ~ 50% of the total investment funded through equity

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

PE activity in logistics space

No. of PE deals in Logisitics Deal value of PE deals in Logistics (US$mn)

Recent Warehousing Deals

Date Jun-11 Company JICS Logistic Investors IIML Sector Agri-Commodities Warehousing Deal Value (US$mn) 9

Dec-10 Sep-10 Jul-10 Mar-10 Mar-08 Dec-07 Nov-07

Continental Warehousing Corp

Swastik Roadlines Cold Star Logistics National Collateral Management Services Snowman Frozen Foods DRS Warehousing MJ Logistic Services-SPV NDR Warehousing

Warburg Pincus
India Equity Partners Tuscan Ventures International Finance Corp. IFC Kotak Realty Fund Eredene Capital Kotak Realty Fund

Logistics (Cold Chain) Cold Chain Warehousing Cold Chain Warehouse Services Warehouse Warehousing

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

Contact Equirus

Name: Mohit Khullar Email: Website:

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

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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