Mumbai: ColdEX Logistics Pvt. Ltd, a cold chain company, is in talks with a clutch of private equity (PE) firms and strategic investors to raise around Rs.300-500 crore, a top official said.
The new round of funding may be a mix of equity and debt and will also provide an exit route for India Equity Partners, a PE firm which had invested in the company, said Gaurav Jain, managing director at ColdEX.
“We will make the final decision about the investor in the next three to six months and we are trying to see who is best suited for it,” he said in an interview.
The logistics and cold chain industry in India has in recent months consolidated and raised funds as companies build a war chest to tap growing demand.
On 30 October, Gati Ltd, a logistics company, sold a minority stake in its cold chain unit—Gati Kausar India Ltd—to Mandala Capital AG Fund Ltd and Mandala Agribusiness Investments II Ltd raised Rs.150 crore. In August, Snowman Logistics Ltd, a company, promoted by Gateway Distriparks Ltd, raised Rs.197 crore from the sale of 42 million equity shares in an initial public offering (IPO) that was subscribed 60 times.
Investor appetite in the sector has increased in recent times, according to Jain.
“A lot of macro triggers have happened over the last one year, specifically in the food compliance space with the Food Safety Act, so many of our clients have moved to our integrated offerings in order to be compliant,” Jain said in an interview. The pharma industry will be another focus area going forward, he said.
The fund raising will help the firm expand its facilities in the country as it prepares itself to cater to the growing quick service restaurant chain market. Currently, ColdEX has clients like Burger King, Starbucks and Yum! among others.
In December 2010, ColdEX had raised $10 million (Rs.61.5 crore now) from India Equity Partners by diluting a significant minority stake... ColdEX currently earns Rs.200 crore of revenue and is targeting a growth rate of 35%.
Experts say the cold chain industry in India is still in its nascent stage as services offered by most providers are rudimentary and the sector offers a large and growing business opportunity.
According to Srinath Manda, program manager in the transportation and logistics practice at Frost & Sullivan, the industry has a few organized service providers with national coverage that can offer both temperature-controlled transportation and temperature-controlled warehousing services, and a large segment of unorganized service providers.
“The primary reason attributed to this is the high capital costs and operating costs associated with this industry,” Manda said.
Despite supportive initiatives from the government in the past two-three annual budgets, the focus and inclination for investment in this industry by the government and financial institutions have been relatively low, he said.
“This is compelling the existing and new companies venturing into this high potential industry to seek and rely on private equity and venture capital funding to realize their operations and growth,” he said.
The Indian cold chain industry is expected to grow at a compounded annual growth rate (CAGR) of 25.8% till 2017, according to a 2013 report by industry body Associated Chambers of Commerce and Industry of India. The industry is expected to reach Rs.64,000 in value by 2017, the report added.
Cold chain services in India typically cater to sectors such as dairy, poultry and meat, seafood, ready-to-eat foods, chocolates, healthcare and pharmaceuticals, industrial products and fruit and vegetables.
India’s temperature controlled logistics industry is estimated at Rs.12,000-Rs.15,000 crore and is poised to grow 15% to 20%, year on year for the next three to five years, according data filed by Snowman Logistics with the Securities and Exchange Board of India.
