Inclusive Investors Meet
The Inclusive Investors meet held during the Economic Times SCM Summit on June 16th, 2017 at The Leela, Mumbai, was moderated by Mr. Manish Saigal, MD, Alvarez & Marshal.
Manish said that over the last 5 years, the activity levels among investors for logistics enterprises in India have been very dynamic. India has become the second most attractive destination for foreign capital, only after US, since China faces restrictions. Of course, the availability of institutional investments was not adequate in early stage support in India, nor are there scale up investment options readily available.
So, Indian investors were only looking at the medium bracket of Rs.300-400 crores investment, while the first Rs.100 crore journey is the biggest challenge. That was one of the main reasons why foreign venture investment got a window to the Indian market.
Over the last five years, a number of investments have done very well, thanks to new enterprises in eCommerce, which ensured that logistics investment took the centre stage.
Of course, there was the usual problem of plenty- lot of new ideas and solutions with no adequate business experience and execution expertise. Not all bright ideas can be sustainable businesses! This was the reason, why in 2017, when execution became a focus point, a lot of investment dried up. What it meant for the industry:
- There is renewed interest in companies that are solving logistics issues
- GST could pose a revival
- The impact of technology in logistics industry is now a clear fact
- Staying power is critical
- Under the new market dynamics, probably for the first time ever, the industry will see a collaboration between experienced resources and young DNA
How does the industry see the challenge of investment?
Sumit of FireEye said that most eCommerce companies were not, till very recently, open to technology adoption and hence investment in logistics. He sees a shift of investment from B2B to B2C, so investments that were focused on business now are moving towards technology, driven by customer feedback. Even then the investment isn’t very high there, since most companies prefer in-house apps development to outsourcing it. Automation is also being targeted as the desirable technology for investment in the logistics industry. In fact, Manish pointed out that eCommerce has also matured enough to automation – so resilience and a very sharp focus on the first steps is very critical.
Dipti Gupta of Investor India said that hitherto, there was no focus on logistics, but with a clear increase in demand, they have created a team for it.as Make in India has pushed production in the country, eCommerce is growing. Better warehousing and logistics is needed for the new business window to grow, and investment has to be in place for that. She added that GST will add a huge boost to logistics investments. Start-ups are pushing innovation and now government is also identifying and funding start-ups. Sudhir from Marshal and Alvarez added that higher capital is needed in logistics more because, with government aid, the sector has grown and customers have evolved. More affordable and ubiquitous technology also supports.
The only challenge is that the business model of the customer companies are still evolving, there is hope but the next 3-4 years are crucial.
- The age of incremental investment is clearly over, we need to think much bigger, and hence private enterprises need capital support.
- The government has shown huge initiative, and the industry expects the playing field to grow.
- Investment funds have lately been drained in acquiring customers instead of expanding, and that must stop.
- Investment funds need to be utilized in better ways than customer acquisition.
- In India we follow technologies that have been validated globally, but that may not always be workable in India.
Manish closed with the idea that it is important to understand the differentiation of this market and deliver accordingly. You need to be sharp in identifying opportunities. And while smart ideas are good, there has to be relentless focus on execution to drive profitability. The government is supporting with the Make in India strategy, and channels like Invest India exist with the knowledge of what’s possible.
In ending, the mantra should be– “Don’t chase funding- chase Good execution”