NDR Group to add 4-5 million sq ft to InvIT, tap new markets

NDR is a family-led enterprise, having been in the warehousing and related businesses for more than four decades

Chennai-based warehousing firm NDR Group, which manages India's first privately placed infrastructure investment trust (InvIT) in the warehousing space, NDR InvIT Trust, says it plans to place around 4-5 million square feet (sq ft) of additional assets from the group level to the InvIT in the near term.

The company plans to do it through a right of first offer (ROFO). The group is also looking to expand to new markets, such as north-eastern India, thanks to to the growing demand, amid the ongoing e-commerce boom.

"We are targeting consumption markets that are seeing rising demand, such as Odisha and the Northeast. In these areas, we often partner with local players and acquire partially completed warehouses to quickly establish a presence and serve growing e-commerce and FMCG needs," said N Amrutesh Reddy, managing director of NDR Group, in a recent interaction with Moneycontrol.

Reddy added that the ROFO assets are located in markets like Kolkata, central India, and elsewhere. NDR InvIT Trust has assets under management (AUM) of around 19 million sq ft, worth around Rs 5,000 crore.

Reddy added that the InvIT would be open to buying and leasing back warehousing facilities, due to the better value proposition, with many asset managers also exploring similar strategies.

How the acquisition will be funded

The acquisition of the ROFO assets are expected to be funded through the InvIT's last two major debt fundraises -- Rs 745 crore from the National Bank for Financing Infrastructure and Development (NaBFID), and Rs 630 crore from the World Bank Group-backed International Finance Corporation (IFC).

Reddy said that the InvIT is looking at more equity fundraises in the future, in order to keep debt below 25 percent of the enterprise value (EV), while aiming to grow the AUM by around 20 percent annually.

"We are increasingly open to smaller investments from HNIs (high net worth individuals) and retail investors, rather than relying solely on large funds, to encourage broader market participation," Reddy said, during the interaction.

Unlike most large warehousing firms in India that are led by prominent private equity firms, such as CPPIB, Hillhouse, and Blackstone, NDR is a family-led enterprise, having been in the warehousing and related businesses for more than four decades.

NDR was also in the container freight business, before selling the vertical to ports and logistics giant DP World in 2016. Reddy said that the group's current business, Grade-A warehousing, started in 2000.

Reddy said much of the company’s warehousing inventory, around 80 percent, is targeted at consumer-facing segments like e-commerce, third-party logistics, and FMCG, with growth in consumer segments being faster than that in industrial spaces, with the latter growing "typically around 5-6 percent per year."

Although InvITs remain an emerging vertical, along with real estate investment trusts (REITs), Reddy remains confident about the segment, with asset owners increasingly looking to monetise assets such as roads and power grids through the InvIT route, even though returns are relatively moderate.

"As a private Indian company, we had shorter financial cycles and couldn’t afford to wait 10–20 years for returns, as compared to fund-led businesses. InvITs offered a solution, by listing assets, we could pay off debt and use the same cash flows to pay shareholders, creating a strong financial foundation with minimal leverage and enabling faster growth. Investors are comfortable with lower returns, around 8–9 percent, compared to private equity because the underlying assets are stable and not subject to high speculation. This model also allows companies to refinance, raise equity, and grow more efficiently," said Reddy.