The
World Bank Group member IFC has extended $75 million or over Rs 557 crore debt support to Industrial
real estate and logistics parks’ developer IndoSpace’s logistics fund to develop logistics and industrial parks with an objective to enhance warehousing and supply chain infrastructure in India.
The development financial institution is extending the loan to IndoSpace Logistics Parks III LP, a $580-million vintage fund, and the first tranche of this amount has already been disbursed to IndoSpace.
The $580 million fund, post leverage is expected to create a corpus of over $1.2 billion to develop and acquire industrial and logistics-related real estate investments in the country.
IFC’s investment is expected to help IndoSpace expand and lease to e-commerce players and online retailers in the country to meet their growing demand for warehouses.
“IFC’s long-term finance in a challenging credit environment will enable us to continue our business plan and be market-ready as the economy recovers and the demand picks up in the near future. The timely investment will contribute toward developing a reliable and efficient logistics ecosystem in India, facilitating domestic and foreign trade while supporting local manufacturing,” said Rajesh Jaggi, Vice Chairman – Real Estate, Everstone Group.
IndoSpace is a joint venture between the Everstone Group, an India and Southeast Asia-focused private equity and real estate investor, GLP and Realterm, a US-based global industrial real estate group.
“In keeping with IFC’s priorities in India, the project will help accelerate a green post-Covid recovery by supporting a strong business infrastructure, which is critical to attract investment and boost the country’s industrial capacity,” said Rana Karadsheh, Regional Industry Director for Manufacturing, Agribusiness and Services, Asia Pacific at IFC.
According to her, while businesses look at recouping growth, they will have ready access to industrial and warehousing facilities, minimizing challenges to establishing or expanding their operations in India. This will help contribute to the resilience of real sector markets, helping the country overcome disruptions posed by the global pandemic.
The first investment from this loan facility will help IndoSpace build a warehouse in Luhari III, a site near with connectivity into Gurgaon, Delhi, and other key areas in the North.
In late 2020, IndoSpace partnered with KoolEx, a leading pharma cold chain logistics service provider, to build three temperature-controlled pharmaceutical distribution centers across India. The first one, near Mumbai, will be India’s largest stand-alone temperature-controlled warehousing facility.
With pandemic-related lockdowns creating pressure on traditional supply chains and prompting consumers to shift to online purchasing, IFC’s support will help strengthen warehousing facilities to accommodate the increasing demand for essentials, including pharmaceuticals and fast-moving consumer goods (FMCG).
Moreover, as India emerges from the pandemic-led crisis, the financing will help accelerate construction and development of parks, preserving thousands of jobs.
Logistics costs in India are estimated to be high at around 13% t0 14% of gross domestic product (GDP), compared with around 9% to 10% in the US and Europe. While warehousing is a fundamental part of logistics and supply chains, it is significantly undersupplied in the country. Further, the sector is largely fragmented with unorganized players accounting for nearly 90% of the market.
Against this backdrop, several estimates show that around $13 billion funding is required for the development of new warehousing capacity in India over the next decade. Given the market opportunity, a robust warehousing and logistics infrastructure that meets global standards, can help attract investment in the country and enable more commerce in the region, driving competitiveness.
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