Innovation, Investments Lifting Spirits Of Indian Logistics

Indian logistics sector, with the backing of the government, is witnessing innovative advances in technology and massive investments. The tax reform and the infrastructure status are likely to bolster infrastructure development in the country.

- Shreya Bhattacharya

Year 2017 has to be the most stirring and action-packed year for India’s logistics sector in recent years. While the sector was steadily picking up pace with technology adoption, bringing major changes to eliminate inefficiency, the implementation of GST and the assigning of infrastructure status has suddenly changed its entire dynamics.

In the long-term perspective, the most encouraging impact of infrastructure status will be on investments coming into the logistics sector. The new status is likely to remodel logistics as a sought-after asset class for investments. This is certainly going to give a fillip to the private sector investments especially in multi modal logistics parks, warehouses and cold chains, says credit rating agency ICRA.

Talking about the recent clarifications on eligibility of the sub-segments in the sector, K Ravichandran, senior VP and group head- corporate ratings, ICRA says, “Consequent to this move, companies will be able to access funding at a relatively higher debt: equity ratio; avail loans with longer maturity; access external commercial borrowings with relaxed terms; and borrow from specialised infrastructure lenders/ insurance companies/provident funds.Since the announcement has come at a time, when many Indian companies and private equity funds are drawing up plans for new investments and expansion in existing sites, this gives a much-needed boost to their plans.”

Indeed, the move comes at a time when logistics is seeing big-ticket investments in the country. Recently, online retailer Flipkart invested over $400 million in its logistics arm eKart. According to filings with the ministry of corporate affairs, Instakart Services received four separate tranches of investment from Flipkart, amounting to roughly Rs 2,600 crore (about $408 million) since September. The latest tranche of Rs 1,200 crore was the largest infusion that Flipkart made in eKart over the past six months.