Private equity investors bring in deals worth $983 mn in January: Thornton

January was dominated by investments in start-ups which contributed to 52% of total investment volumes

Private equity (PE) investors announced deals worth $983 million in January, a 23 per cent rise in value terms over last year, driven by big ticket transactions, says a Grant Thornton report.

According to the assurance, tax and advisory firm, in January, there were 84 PE deals worth $983 million, against 81 such transactions worth $796 million in January 2017.

“Private equity deals recorded 4 per cent increase in deal volumes and 23 per cent increase in deal value in January 2018 as compared to January 2017,” said Pankaj Chopda Director at Grant Thornton India LLP.

January was dominated by investments in start-ups which contributed to 52 per cent of total investment volumes. On the other hand, energy & natural resources and real estate sectors witnessed big-ticket PE investment over $100 million together capturing 39 per cent of total PE deal values.

Altico Capital’s investment of $195 million across five realty projects in Hyderabad and Pune was the top PE deal in January.

Other major transactions include Canada Pension Plan Investment Board’s 6 per cent stake acquisition in ReNew Power Ventures for $144 million and Warburg Pincus and SAIF Partners’ $50 million investment in Rivigo Services.

Going forward, the PE deal outlook looks bullish especially for the start-up sector.

“Increasing customer penetration in online transactions and increasing solutions to simplify online transactions offered by start-ups will attract interest in start-ups engaged in retail, fintech, foodtech, on demand services and travel and logistics,” Chopda said.

“Government reforms such as RERA, focus on cleantech and on increasing digital financial transactions will drive the momentum in banking and financial, real estate and energy and natural resources.

India-specific strategies by global and already present PE firms and funds raised by new players will act as catalyst for PE transactions,” he added.

Source: Business Standard


GST bringing realty shake-up

Retailers, both of physical stores and e-commerce entities, fast moving consumer goods (FMCG) companies and those in consumer durables have started rejigging their warehouse strategy.

This is in preparation for the national goods and services tax (GST), with the government working to an April 2017 deadline. All this could mean a shake-up in real estate, say analysts. A rough calculation suggests these businesses could look at reducing their warehouse count to half, while stepping up the total space acquisition in select destinations, once GST comes into play. In the next two to three years, businesses could see significant cost reduction due to the revised strategy.

Hindustan Unilever, Nestle, Johnson & Johnson and Shoppers Stop are among those to have begun work on consolidating their warehouses, according to a source. These companies will take up mega space, in millions of square feet, to set up ‘mother warehouses’, he said. In the online space, top companies such as Flipkart and Amazon have been on an expansion spree for warehouses and fulfillment centres in the past two years, primarily to suit the complex tax structure through the country. Now, however, they won’t feel the need to have warehouses in every state and can strategise accordingly, Vijaya Ganesh Thangavel, managing director, Land & Industrial (India), Cushman & Wakefield, told this newspaper.

For instance, Max Fashion, a prominent retailer, has eight warehouses totaling 400,000 sq ft. The number is likely to come down to four after GST, says chief executive Vasanth Kumar. “The number will get firmed up once we know the full GST details and the implications such as the reverse logistics needs,’’ he said. Post GST, their warehouse count will be down but the total space covered could go up to around 600,000 sq ft by 2018 “to meet future business needs, as well our rate of growth at a 30-plus per cent CAGR (compounded annual rate)”.

If a typical e-commerce company was taking 300,000 to 400,000 sq ft in metros and tier-1 cities for warehouses, 100,000 sq ft in tier-2 and 40,000 to 50,000 sq ft in tier-3, the plan now will be to go for million sq ft space and more, away from big cities and in fewer locations, primarily where real estate cost won’t be prohibitive, says Thangavel of Cushman. Distribution centres, smaller in size in the range of 40,000 to 50,000 sq ft, could be set up closer to cities.

The biggest trend now is that prominent developers are getting into the warehouse space, which has mostly been a domain of local land owners till recently, according to Thangavel. Along with realtors, a new breed of advisors are coming up, only for warehouse planning. Also, warehouse parks are being set up for large structures. While the exercise of restructuring the warehouses will take a couple of years, he projects a cost reduction of at least 10 to 15 per cent by 2019-2020. Estimates are that big companies which have on an average one warehouse in every state, totaling to anything from 20 to 25, might look at eight to 10, pan-India post-GST.

“We understand that a few of the larger companies have started consolidating their warehousing requirements in strategic locations, in anticipation of GST, with a view to bringing efficiency into their supply chain,’’ said Rami Kaushal, managing director, Consulting and Valuations, CBRE South Asia.

Besides retailers and FMCG companies, even pharmaceutical companies would look at rationalising the number of operational warehouses and swap these for better quality and larger format ones, he said.

“Implementation of GST is expected to lead to rationalisation of warehousing demand, leading to lower logistics cost and reduced delivery time of manufactured goods,’’ Kaushal explained. The current complicated tax structure meant that choice in setting up inventory and distribution centres were based on the tax regime, rather than on operational efficiency, he said.

GST, when implemented, will free the decisions on warehousing and distribution from these tax considerations, according to Kaushal. ”This would enable occupiers to create larger hubs, servicing two or more states from a single location, which would help optimise inventory costs and increase efficiency.’’ This shift in operational planning would ultimately result in a hub and spoke model being adopted by many of the occupiers, he added.

Industrial warehousing space is estimated at approximately 800 million sq ft across the country and is expected to grow by nine to 10 per cent annually. A few sectors such as e-commerce, modern retailing and FMCG are expected to grow at about 20 per cent annually in the short term, according to CBRE.

A recent JLL report listed the National Capital Region, Mumbai, Pune, Bengaluru, Chennai, Hyderabad, Kolkata and Ahmedabad as top warehouse hubs. These eight city hubs together had a cumulative supply of organised Grade-A and Grade-B warehousing space of around 97 mn sq ft in 2015; this is expected to grow to around 116 mn sq ft by the end of 2016. It added that GST will result in emergence of new hubs such as Belgaum, Bhubaneswar, Coimbatore, Goa, Guwahati, Indore, Jaipur, Kolhapur, Lucknow/ Kanpur, Ludhiana, Nagpur, Patna, Raipur, Ranchi, Vapi and Vijayawada.



World’s largest IT storage company EMC in race to develop smart cities in India

EMC is offering its services to the central and state governments, according to senior officials of the company.

The world’s largest IT storage company is in the race for developing smart cities in India, offering their services to the central and state governments, according to senior officials of the company.

“We have already completed a health project for a state government to make hospitals smart and to provide real time information to the government for taking appropriate decision,” Rajesh Janey, President, EMC India and Saarc, told visiting Indian journalists to the EMC world annual conference here.

The project was done for Telengana, the newest state in India. “We are talking to the central governments as well as state authorities to offer the hardware and software to make cities smart,” Janey said.

The Narendra Modi government had announced an initiative to develop 100 smart cities in India, with initial funds of Rs.7,000 crore being allocated for the project by the central government, though very little was actually spent. The project would be implemented by state governments or city councils.

EMC and Dell had announced a $67 billion merger in October, making it the largest tech marriage in history. The EMC World conference at the casino capital of the world was told by Michael Dell, Chairman and CEO of Dell, on Monday that the merged entity would be called Dell Technologies while the enterprise company would be named Dell-EMC.

The merger is awaiting some regulatory approvals and is likely to be completed between June and October, according to the team set up to work out the logistics of two tech giants coming together.

EMC has over 5,000 employees in India, largely in the engineering section, with offices in Bengaluru, Hyderbad, Delhi NCR and some tier-two towns. It provides storage hardware and software to companies and did about $350 million (Rs.2,400 crore) business last year. The $25 billion EMC employs around 70,000 employees globally.

EMC has set up a division on smart cities, whereby they are offering services for collating all data from health services, traffic, police, power infrastructure, municipalities, weather division, transport and government services collating all data from health services, traffic, police, power infrastructure, municipalities, weather division, transport and government services collating data and bringing forth significant information which needed decisions. Also, the interface with citizens and those who seek services would become much easier, officials say.

According to Rob Silverberg, Director and Chief Technology Officer, Enterprise Application Architecture for State, Local Government and Education at EMC California, the company is focusing on smart cities because it’s the world of future.

“We are talking to several cities and towns across the US to adopt what we have to offer,” said Silverberg, adding it would help city officials do their job more effectively and efficiently. He said the Indian section of EMC was following up on the smart cities in India. EMC is competing in smart cities business in the US and other countries with IBM.

Silverberg said that already a huge amount of data was being collected every day and every minute whether in crime tackling, traffic regulation or policing and other activities. “The data has to be stored and made intelligible for everyone so that right decisions are made fast.”

Silverberg said the EMC smart cities project could even help track crimes and prepare evidence for courts whether it’s through video monitoring data already been collected across the country or other methods. “Essential everything is data, and we are the experts who can help store and make sense of it,” he said.

According to Janey, the basic modules which the global company is now projecting to cities in various parts of the world, including Dubai, was made in Bengaluru by Indian software engineers. Janey said that EMC International had thrown up demand and the engineers in India came up with an effective solution which was adopted by the multinational.