Private equity firm India Equity Partners (IEP) has inducted Abhik Mitra as the platform CEO to lead its logistics arm that houses the recently acquired domestic road operations of Dutch freight & logistics giant TNT Express in India. Mitra, whose LinkedIn profile counts him as an operating partner of IEP, is the former managing director of TNT India.
IEP completed the transaction to acquire TNT’s domestic road express business last week in one of the rare control deals in the Indian private equity market. Although TNT Express is not the biggest player in the road transport logistics space in India, given the human resource base, this deal will be one of the biggest private equity transactions in the Indian logistics business.
It was earlier announced that the senior management and most employees (approximately 1,000) of TNT Express’ domestic road business will move to IEP.
According to a company statement, TNT's domestic road express business is one of the top four players in the sector that had an addressable market estimated at Rs 2,100 crore in 2010. The road express business is one of the fastest growing segments in the Indian logistics sector growing at an annual rate of 20 per cent.
The top four players comprise half of the market due to the entry barriers, as it requires large investments to build scale and the high fixed costs of running a scheduled network.
KK Iyer, managing director of IEP Fund Advisors, who previously led Accenture's logistics practice in India, said, "This investment is consistent with IEP's differentiated investment strategy of control platform investments and portfolio value-add. We see TNT's domestic road express business as a first step in building out our Logistics platform and intend to pursue other exciting investment opportunities in this sector."
The latest deal strengthens IEP’s exposure in the logistics sector adding to its three existing portfolio companies across different segments of the business. These include Fourcee Infrastructure - a niche liquid logistics rail transportation company, which doubled its business over the previous fiscal year; Swastik Roadlines (Coldex) – one of the country’s top cold chain surface transportation company, (which grew 40 per cent last year) and Ocean Sparkle - one of India's largest private harbor and seaport management services provider that clocked 30 per cent growth last fiscal.
TNT Express was the third control deal during 2011 for IEP, which invests through a $350 million fund. This shows how mid-stage control deals happens to be a key focus area for the PE firm.
For the Dutch logistics giant, the decision to sell a part of the Indian operations comes after an extensive review of the prospects for the domestic road business in India within TNT Express’ business portfolio.
TNT Express, which demerged from the Dutch mail unit PostNL early last year, has been facing shareholder ire with crumbling corporate valuation and pressure on the bottom line. Some shareholders see its strategic push into emerging markets as risky since Asian and Latin American businesses represent a little less than one-third of the total revenues but have been a drag on profitability.