Merrill pumps in $75 Mn into logistics JV

Merrill pumps in $75 Mn into logistics JV

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Mumbai: Wealth management firm Merrill Lynch has invested close to Rs 300 crore ($75 million) to set up a joint venture company with the DRS Group, a Third Party Logistics (3PL) company headquartered in New Delhi. The new entity, DRS Warehousing, will build and operate eight warehouses located in various parts of the country. "We have formed a Special Purpose Vehicle (SPV) for warehouse construction and management," said a DRS Group official requesting anonymity.

The DRS Group is expected to hold 30 percent stake in the JV, while the remaining stake will go to Merrill Lynch. According to sources, each warehouse will be more than 2,00,000 square feet and four warehouses will see a completion target before December, 2008. "The construction of warehouses at Jaipur, Delhi, Nashik and Ambala has already begun while the process of land identification for the other four warehouses is on," added the official.

By 2008, 3PL service providers, with the likes of TNT, Transport Corporation of India, Blue Dart, Gati and Safexpress, are looking at creating more than 25 million square feet of warehousing space in India.

Analysts suggest the segment alone will see investments to the tune of Rs 2,000 crore flowing in the next three years. There is a reason for this. As Central Sales Tax has been phased out, manufacturers can outsource warehouse management to third parties.

On the supply front too, 3PL service providers are more than willing to invest in warehouses because of substantially higher margins in warehousing than any other segment of supply chain management. Transportation of goods, across road, rail, air or sea, for instance, has profit margins at best not more than 20 percent.

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