Saturday, September 23, 2017

Interaction-Anshul Singhal, CEO, Embassy Industrial Parks

Warehousing poised for accelerated growth

 

Few real estate developers are focused on warehousing with an eye on manifesting its nascent potential in India. In an exclusive interview to CONSTRUCTION OPPORTUNITIES, ANSHUL SINGHAL, CEO, EMBASSY INDUSTRIAL PARKS, discusses India’s latent potential in warehousing and elaborates on their latest strategic initiative of building state-of-the-art hi-tech capacities in India.

 

Briefly give us an overview of the Indian warehousing sector, the latest trend, and the current business drivers.

`Over a period of time warehousing industry in India has evolved from just brick and mortar shelters into highly sophisticated stockrooms, where, thanks to advanced tracking mechanism, each consignment can be tracked on a real time basis at the click of a button. Without these state-of-the-art facilities it would have been a Herculean task for companies to ship and deliver consignments to designated consignee, and the rise of e-tail in India would have remained but a fairy tale. Not just e-tail, in any industry segment which deals with physical goods, warehouses play a vital role in the entire value chain — from raw material to customer delight. India’s logistic and warehousing sector is poised for accelerated growth, led by; GDP revival, ramp up in transport infrastructure, e-commerce penetration, impending GST implementation, and other initiatives like ‘Make in India.’ Indian 3PL market is expected to grow with CAGR of 6 per cent over the next five years. The total stock of Grade A and Grade B warehouses in the country grew about 16 per cent in 2016. The global market for warehousing services is on pace to grow to rising demand from the manufacturing, pharmaceutical, and healthcare sectors. As per the JLL report, 2018 forecasted supply for warehouses stock is 157 million sq.ft in Grade A and Grade B, the incremental demand between 2016 and 2020 is expected to be 218 million sq.ft. The deficit between projected demand and supply between 2016 and 2020 currently is 129 million sq.ft. With the implementation of GST, many manufacturing industries would shift focus towards the hub-spoke model of warehousing which would eventually reduce the smaller warehouses present across locations and increase bigger warehouses.

 

Briefly assess the impact of GST on the warehousing sector. Do you recommend any modifications in current structure of the GST.

Post the Goods and Services Tax (GST), warehousing activity in the region has moved towards a more systematic mode of operation leading to an inflow of more institutional funding and formal sources of capital. A recent survey about leading warehousing occupiers in the country revealed that consolidation and expansion will be the key theme driving warehousing demand in the region. This will result in increased demand for larger and better quality warehouses leading to emergence of new warehousing hubs as well as expansion of the existing hubs. The survey also revealed that 30 per cent of respondents said that they will further expand their footprint in the warehousing market of Delhi-NCR in the post GST scenario. GST will ensure that India for the first time will be exposed to consolidate large space central warehousing parks instead of the current scattered poor quality standalone spaces. Our country will take some time to evolve for the GST tax structure which will eventually be user friendly.

 

What kind of government policies would foster growth of the warehousing sector.

Government policies like Skill India, Make in India, Digital India, Smart Cities and GST would foster the growth of the warehousing sector in the country.

 

Briefly tell us about the role played by your company in the warehousing /logistics space and the services offered. Tell us of the warehousing and logistics capacities of your firm, geographies, and investments.

The total warehousing space requirement in the main markets is expected to grow at a compounded annual growth rate (CAGR) of 8 pe cent from 621 million sq.ft in 2016, to 839 million sq.ft by 2020. Hence, over the next four-year period, an incremental 218 million sq.ft or 54 million sq.ft per annum of warehousing space will be required in the top seven markets of India. These godowns of yesterday for storing goods will need to be turned into highly sophisticated stockrooms.

Warehouses play a vital role in the entire value chain from raw material to customer delight. We formed Embassy Industrial Parks to address the challenges of companies grappling with building and managing industrial and warehousing spaces in a large, diverse and geographically distributed markets like India. Embassy Industrial Parks are committed in bringing quality Grade A industrial, light manufacturing and warehousing spaces in close proximity to leading consumer and industrial centers across the country. Since our commencement, over the last 2.5 years, we have bought important parcels of land across the country. Embassy Industrial Parks aims to build about 20 million sq. ft of industrial and warehousing space over the next five years across India. We have already signed lands which are at various stages of acquisition in Chennai, Delhi, Pune, Mumbai, and NCR, and we are actively working to acquire lands in Gujarat and Kolkata. Embassy Industrial Parks has invested a total cost of `140 crore in Gurgaon project and has also invested `350 crore to build a 1.1- million sq.ft industrial park at Chakan, Pune. The group is planning to invest equity of about `1600 crore to build other industrial parks over the next six years. We have been able to build our presence in every real estate vertical and have a profound understanding and market share of this industry. Embassy Industrial Parks is set up as independent business vertical, professionally managed, equipped with the right resources, skill sets, and necessary empowerment.

 

Elaborate on the modern technologies and innovations leveraged in your facilities.

The role of warehouses has increased due to wider product range, emphasis on shorter lead times, and constant changes in customer demand. The emerging new technologies are creating strategic opportunities for organisations to build competitive advantages in various functional areas of management including logistics and supply chain management. However the degree of success depends on the selection of right technology for the application, availability of proper organizational infrastructure, culture and management policies. New technology concepts like fast track technology, PEB, precast and sustainable technology are few innovations leveraged by our facilities. Moreover, the industrial parks, apart from the world-class warehousing and logistics facilities, will boast of a host of special amenities such as truck parking, canteens, rest areas, dormitories, business centers etc. ensuring that each park becomes a self-sustaining business environment. All this is happening in India for the first time.

 

What are the drivers for warehousing/logistics business and how do you see business unfolding in 2017-2018.

The key driver for warehousing and logistics services is the growth of MNCs, emergence and growth of 3PL and 4PL,FDI, e-commerce, Policy changes at government level, Make in India, Internet penetration into villages, robust trade growth, globalisation of manufacturing systems and streamlining of the indirect tax structure. These comprehensive supply chain strategies are the ones that increase the need for integrated logistics solutions. The demand drivers considered for warehousing market are the manufacturing and consumption sectors. The manufacturing sector-led demand comprises the requirements arising from the need for storage of raw materials and finished products from industries such as automobiles, cement, and food processing, among others. In terms of consumption-led demand, all product categories, ranging from apparel and footwear to home and lifestyle. With the implementation of GST and resulting uniform taxation across states, it will result in consolidation of supply chain and hence warehousing capacities. The industry will move from unorganized players into larger, modern and technologically advanced warehouses. As per industry veterans, the warehousing business is likely to grow at 9 to 11 percent every year. This is because of the strong government support and constant reforms

 

Future outlook for the industry and from a company perspective.

The future of Industrial real estate in India is very bright. It is already being termed as the future of India real estate. As we have discussed, warehousing and Industrial logistical requirements are growing and this growth is here to stay. Indian consumers are demanding better quality and smarter spaces which are not just comparable but higher than international standards. The biggest indicator of its future is that the Government Of India plans to build multimodal logistic parks across the country with an investment of `33,000 crore in a bid to bring down costs incurred n logistics, it will also lay low the overall freight cost, reduce vehicular pollution and congestion, and will enable reduction of warehousing costs of the country. Embassy Industrial Parks aims to build 20 million sq ft of industrial and warehousing space over the next five years across India. We have already signed lands which are at various stages of acquisition in Chennai, Delhi, Pune, Mumbai and NCR, and we are actively working to acquire lands in Gujarat and Kolkata.




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