Logistics firm AFL likely to get $1 Million from U.S. PE firm

New Delhi: Logistics firm AFL is likely to get at least $1 Million (100 crore) from a U.S. private equity (PE) firm for a minority stake. The money will be used by firm, promoted by Cyrus Guzder to build warehouses and distribution infrastructure, reports P.R. Sanjai and Shraddha Nair of Mint.

According to industry analysts, with inflow of cash and management expertise from a PE firm, AFL could elevate its third-party logistics (3PL) infrastructure, including warehouses, fleet and IT systems.

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The logistics industry, which is estimated to contribute around 13 percent of gross domestic product, is divided into ocean freight, air freight, rail freight, trucking and 3PL services.

According to Sunil Devrani, Managing Director of Direct Logistics India, logistics is a business that has a high working-capital and low-margin with no huge reserves for further expansion in most of the cases.

In 2008, there were 17 PE deals worth $491 million in logistics firms. But in 2009, it decreased to 10 PE deals worth $182 million. In 2010, there have been just two deals worth $43 million.

PE firms that have invested in Indian logistics companies include New York-based Blackstone Group, US-based New Enterprise Associates, Aureos India Fund and ePlanet Ventures and International Finance Corp., a World Bank arm.