The Hindu Business Line : Mahindra Logistics phases out Rs 1,000-cr investment plan

The economic slowdown has prompted Mahindra Logistics, the 100-per cent subsidiary of Mahindra & Mahindra, to phase out its investment of Rs 1,000 crore over the next 3-4 years instead of the originally planned two-year period.

The company will kick off with an investment of Rs 400 crore over the next 18-24 months. “The decision is a fall-out of the current market situation,” Mr Sanjay Sinha, Managing Director of Mahindra Logistics, told Business Line.

The money would be primarily utilised for modern warehouses. Currently, it has 65 lakh square feet of warehousing space and plans to add 27 lakh square feet in the next few months. However, only a fourth will be owned by the company, he added.

The biggest constraint it is facing is the non-availability of sophisticated warehouses. However, the company is not looking to enter into large scale construction.

“We will invest in them only till real estate companies begin building those levels of warehouses,” Mr Sinha said.

For the remaining requirement, the company is asking its customers to have them, which would be managed by Mahindra. Mahindra Logistics is also looking for a strategic partner in a 50:50 joint venture.

“This ally will ideally bring in the best global practices, higher competencies and technology along with finance,” he said. In the event this does not work out, the company might go in for debt from banks.

“M&M has already put in Rs 100 crore in the form of equity and now the ball is in our court to raise the next Rs 100 crore. We don’t want to leverage equity beyond 1:1,” said Mr Sinha.

Mahindra Logistics is about a year-and-a-half old in the overseas market.

International presence

It began with auto components but has since expanded into the retail space too. The company is relying on the franchisee model for operations in the US, the UK, Europe, China and other geographies. Approximately 10 per cent of its revenues come from global markets.

About logistics divn

The logistics division, which was part of the core automotive segment of M&M, was spun off into a separate entity last October. It currently has a fleet of 20,000 vehicles and 2,000 employees. Currently, M&M contributes to 27 per cent of its business with the balance coming from outside the group, said Mr Sinha.

With revenues of Rs 850 crore in contract logistics business, Mahindra Logistics has four business divisions focusing on supply chain management, corporate people movement, internal M&M business and international logistics.

It serves about 200 customers across the auto, IT, telecom, pharmaceuticals, retail, FMCG and infrastructure sectors. Plans are underway to foray into the logistics of some technologically advanced segments.