Barely 5 percent of India’s USD 5 billion cold storage industry is organised. But improving macro-economic conditions have got the country's top logistics players excited and many of them are attempting to become integrated cold chain service providers. Several companies are lining up significant capital expenditure (capex) plans in to capture the cold storage business reports CNBC-TV18s Farah Bookwala Vhora.
The success of Snowman Logistics' Initial Public Offering (IPO) proves that India's organised cold storage industry is finally out of deep freeze. Logistics and dedicated cold storage companies are sprucing up their capex plans with an intention to become a one-stop service provider for cold storage solutions. With a strong foothold in cold storage transportation, Coldex, India’s second largest cold chain provider, now hopes to increase its presence in the warehousing business. It aims to build 8 warehousing centres across India through a capex of Rs 150 crore over the next 3 years. This, it says, will increase its capacity from 6,000 pallets to 30,000 pallets.
Sunil Nair, CEO, ColdEX India says, “all our facilities will be integrates. We will offer other services as well like labelling etc.”
Coldex is not alone. Gati, wants to replicate the hub & spoke model of its express delivery biz in its cold chain unit, Gati Kauser, to be able to offer integrated services. It intends to set up 10 cold chain warehouses of 50,000 pallets over the next two and half years. This will entail a capex of Rs 200 crore. Gati Kauser sold a minority stake to Mandala Capital for Rs 150 crore in October, which would be used for expansion.
Experts say cold storage companies are moving towards becoming integrated service providers because it is a highly lucrative biz model.
Nikhil Khandelwal, Director, Systematix Group says, “margins get better when you offer integrated services. To be sustainable you need to be integrated.”
With the economy picking up, players can finally leveraging the support system put in place by the previous govt which allow 100 percent Foreign Direct Investment (FDI) in cold storage, subsidy funding to the tune of 40 percent of the cost of the project and a financial outlay of Rs 5,000 crore for cold chain infrastructure and food parks.
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