TVS ILP plans InvIT to fund growth
TVS ILP is planning to launch InvIT while the Indian warehousing sector is booming. Ramnath Subramaniam of TVS IM speaks about their need for InvIT, challenges and opportunities in the market.
The Indian logistics park developer TVS Industrial & Logistics Parks (TVS ILP) is planning to launch an Infrastructure Investment Trust (InvIT) to generate growth capital for funding future growth plans of the company according to Ramnath Subramaniam, Executive Director at TVS Infrastructure Investment Manager (TVS IM).
As per plans, all the assets which are currently rent-yielding in TVS ILP will be shifted to the InvIT platform and once the InvIT issue is completed every year ready assets will be shifted to this InvIT platform," said Subramaniam.
TVS IM is a wholly owned subsidiary of TVS ILP and has been appointed to act as the investment manager to TVS Infrastructure Trust, an InvIT set-up as per the Securities and Exchange Board of India (SEBI) regulations.
“InvIT is an excellent investment platform created by the Government of India to channelise long-term external and domestic funds to participate in hard assets that are rent yielding” he said.
InvITs are investment instruments that work like mutual funds and are regulated by the Securities and Exchange Board of India (SEBI). In 2014, SEBI gave a nod for Real Estate Investment Trusts (REITs) and InvITs to launch in India.
Subramaniam believes that InvIT will be able to generate capital and fund TVS ILP’s future growth and he spoke to Indian Transport & Logistics News (ITLN) about the challenges, opportunities and future of the Indian warehousing sector.
“InvIT is an excellent investment platform created by the Government of India to channelise long-term external and domestic funds to participate in hard assets that are rent yielding."
Ramnath Subramaniam, TVS IM
There has been a steady flow of investments into the Indian warehousing and logistics park sector. For instance, in July 2024, the fund and logistics park development management platform Welspun One announced the closure of its second fund totalling ₹2,275 crore. In fact, Lingotto, the investment management company owned by Dutch holding company Exor controlled by the Agnelli family, acquired a 21 percent stake in TVS ILP.
However, the Indian warehousing sector is also not without challenges for new investments and new players. For instance, Panattoni, one of the largest industrial real estate developers in the world, marked its debut in Asian markets in July 2022 with the opening of its first operational headquarters in India, located in Bengaluru. However, Panattoni criticised the land acquisition process in India which took them 8 months to clear the formalities of its first land complex.
“Land acquisition in India has always been a challenge and it will continue to be,” says Subramaniam.
He points out that challenges for large funds emerge when they look for large land parcels and land around warehousing clusters that have already peaked.
He said, “If you have to go and buy a hundred-acre land, it is going to remain a challenge. You won't get 100 acres of land without any litigation. Funds come with large capital at interest rates which are competitive and hence they want to come and deploy the money that they have raised with size and scale,” he said.
“People have been able to get land but when all are clustering towards the same pocket the prices go up. Everybody wants to go to Bhiwandi (Maharashtra), NCR (Delhi) or Nelamangala (Karnataka),” he added.
Hence, Subramaniam notes that TVS ILP goes into markets where preferably there is no other Grade A warehousing developer.
“We had the first-mover advantage in most of the places where we entered. For example, when we entered Hosur, we were the first. Same with Madurai and Siliguri. But we also entered these markets because our clients wanted us to.”
He also emphasised that they enter into a market with their customers. “We ensure that the customer is with us before we get into the market. We don't do any speculative land buying. The problem comes when we are doing speculation,” he said.
“We give all the specifications that are required from the client's requirement and we ensure that we get a rental which is sufficient to take care of our cost of capital. And we are able to earn a spread on the same with time,” he added.
To avoid the challenges of land acquisition, TVS ILP also buys government lands and Subramaniam informs that state governments have been very supportive in this sense.
“Government land is one thing which we are consciously trying to focus on given that governments today are extremely forthcoming in wanting to create employment.”
“For example, we've got land in Cuttack (Odisha), Vizag (Andhra Pradesh) and Madhya Pradesh from the government through a single window clearance,” he added.
There are also several positive signs in the macroeconomic scenario for the logistics and warehousing sector. Subramaniam thinks stable government in the centre, rural economy picking up, connectivity infrastructure and evolving state government policies as opportunities in the warehousing sector.
“Countries around the world are seeing upsets in terms of stability of government and continuity of government policies. India has scored a big point with the same government coming back for the third time in a row in terms of continuity of progress and policies for the next five years,” he said.
While the India shining phenomenon has gone very well with the urban population, the rural population and pockets of them have been impacted. Subramaniam thinks that the state and central governments understand this and their focus on rural employment and women's issues through various schemes, will probably also see rural India making a comeback.
This article was originally published in Indian Transport & Logistics News' July-August 2024 issue.
