Shapoorji Pallonji to enter warehousing segment
Mumbai, Oct 14 (PTI) Looking to further diversify its portfolio and tap the growing warehousing sector, Shapoorji Pallonji Real Estate plans to enter the segment and is in talks for strategic partnerships, a top company official has said.
The company is in the process of identifying locations to develop grade A warehousing stock across the country, Shapoorji Pallonji CEO Venkatesh Gopalakrishnan told PTI.
"We have a large residential portfolio and now we want to build a warehousing platform. This is mainly because only residential is also risky. Initially we were commercially heavy and now we are residential heavy," he said.
Talking about potential in the warehousing sector, Gopalakrishnan said there is a good demand for grade A stock and with the introduction of GST and growth in the FMCG and e-commerce sectors, they see it as a huge opportunity to foray into the segment.
According to a recent KPMG report, the Indian warehousing industry, which was valued at Rs 56,000 crore in 2017, is expected to reach 297 million sqft by 2021.
"Currently the warehousing sector is cluttered. With the introduction of GST, there is a consolidation in the warehouse structure in the hub and spoke model. We will have to do more research and analysis. But we feel warehousing is a long-term business and we want to be in this sector," he said.
Asked whether the company was looking at acquiring assets, Gopalakrishnan said, "Warehousing is both greenfield and brownfield opportunity. We are also in talks with global firms for making the foray."
"It is important to have good partner who understands the international standards because the sector has to be seen as a product offering rather than as a structure or a shed."
Shapoorji Pallonji currently has nearly 90 million sqft of residential development in the pipeline across segments like luxury, mid-income and Joyville brand.
Apart from this, the company has developed and leased around 7.5 million sqft of commercial space under the brand SP Infocity and has a portfolio of nearly 10 million sqft of proposed development under this.
"We have two eyes on debt and one eye on growth. We are not very hungry for growth but we would now want to shift our focus to more specific sectors like warehousing or low cost housing where we see immense potential," he said.
The company, which is sitting on a debt of around Rs 4,000 crore, is looking to sell its commercial projects as a strategy to focus on core businesses.
"We are identifying locations where we can set up Grade A warehousing facilities and we believe it can be done across the country," he said.
Explaining the business model, Gopalakrishnan said the returns in this sector are between 12-15 per cent, less than what the company would make on land deal or on sale of residential space.
"In warehousing, if you buy land and lease at Rs 20-25 per sqft and after 10 years this land gets re-rated, then all your payback is happening on warehousing as land becomes very valuable," he added. PTI PSK DSK BEN GK GK
Disclaimer :- This story has not been edited by Outlook staff and is auto-generated from news agency feeds. Source: PTI