The logistics players are scouting for acquisitions in the US, China, the UK and Germany. While Allcargo Global Logistics and Aqua Logistics are likely to announce their strategic acquisitions within four to six months, others like Future Supply Chains, the logistics arm of Future Group, is still evaluating its options.
Logistics costs contribute to around 13% of the country’s GDP, while they contribute to only about 8% in developed countries. The size of the distribution and logistics market is expected to be around $125 billion by 2012.
In this calendar year, the sector has seen M&A activities of about $300 million. Fast-paced growth of the industrial sector coupled with the strong progress of the agricultural sector has set the Indian logistics sector on a growth trajectory. ?Logistics companies now are actively looking out for strategic acquisitions mainly driven by their focus on growth in certain regions, to strengthen their linkages. Much action has been seen in the recent past on the asset light logistics business which is also high in value terms,? KPMG executive director (transport & logistics) Manish Saigal said.
Allcargo, which acquired ECU Lines in 2006, is now the world’s second largest in providing less-than container load (LCL). It is now actively looking at a possible acquisition in China. The company raised nearly Rs 100 crore through qualified institutional placement (QIP) to fund its expansion plans. ?The QIP proceeds will be used for acquisition in China, US and India. There are strategic and tactical reasons for the selection of these geographies for acquisitions,? a senior company official said.
The logistics arm of the Future Group said that it is open for inorganic growth in the area of international logistics, which is a relatively new business for the company. ?We are open to inorganic growth for our international logistics business. We have our office in China and are looking at other markets like Thailand, Malaysia and Turkey,? said Anshuman Singh, MD & CEO, Future Supply Chains. M&A is not restricted to Indian companies going out for acquisitions, but India is a lucrative region for foreign logistics companies as well to establish their base in the country. Since foreign companies are not conversant with the culture, government policies, or distribution landscape of the country, the M&A route gives them a way to enter the region and to focus on their core competencies.
In March 2010, NYK Holding, a wholly owned subsidiary of NYK, has acquired a 26% stake in TM International Logistics Ltd (TMILL), steel related logistics arm of Tata Steel. Also in May this year, Hitachi Transport System of Japan, a unit of Hitachi, has acquired Flyjac Logistics, a leading domestic logistics major in India for Rs 250 crore.
