Kintetsu World, Gati to form logistics JV

REUTERS - Japanese logistics company Kintetsu World Express plans to invest 2.68 billion rupees for a 30 percent stake in a joint venture with Gati Ltd to gain access to the growing Indian market.

The announcement by the two companies sent shares in Gati down 10 percent, the daily limit, in a flat Mumbai market on worries the plan would result in spinning off a part of the Indian company's profitable express freight business.

Gati, whose activities include freight, warehousing and shipping, said it would transfer its debt of 3.3 billion rupees to the new joint venture, Gati-Kintetsu Express, which would control the distribution and supply chain business.

"This partnership, apart from providing value for the joint venture partners, will greatly enhance value for Gati shareholders," Gati's chief executive, Mahendra Agarwal, said in a statement.

The investment values Gati's distribution business at 8.93 billion rupees.

The market has been expecting the company to sell stakes in its shipping business, which has not been doing well, but the joint venture plan seems to indicate this is not the case, a trader said.

Agarwal told Reuters last year, the company was planning to sell between 26 percent and 49 percent of its shipping business to a global shipping company to raise funds and expand the business.

No decision has been taken on this, a company spokeswoman said on Monday.

Shares in Gati, valued by the market at about $81 million, were down 9.9 percent at 41.85 rupees by 1:50 p.m. (0820 GMT), while the main index was flat. Kintetsu World closed up 0.25 percent at 2,403 yen, before the announcement.

(Reporting by Kaustubh Kulkarni in MUMBAI; Editing by Ranjit Gangadharan)