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Where is the logistics investment going?

The remarkable rise of the Indian economy has significantly fueled the need for logistics services. The logistics business is witnessing investments, but which sector is attracting the most investors?

Where is the logistics investment going?
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In September 2022, Prime Minister Narendra Modi announced the new National Logistics Policy (NLP), which aims to reduce logistics costs in India from the current 14-18% of the country's GDP to the global best of roughly 8% by 2030 and to create a data-driven decision support mechanism for an efficient logistics ecosystem.

The media is flooded with headlines about investments in new logistic parks and warehouses, but how much money is being invested in the transportation and logistics sectors to guarantee that freight arrives at these facilities smoothly and on time?

Logistics industry today
In recent years, the Indian logistics sector has grown significantly. The country's robust retail and manufacturing environment has allowed it to resume growth that was slowed by the Covid-19 pandemic.

"The Indian eCommerce industry, currently worth $84 billion, is projected to grow at a 24% CAGR and is expected to reach $350 billion by 2030. This can be achieved through greater investment and innovation in the logistics sector, as propelled by the government's National Logistics Policy, Unified Logistics Interface Platform (ULIP), and other initiatives, as well as the recent rise in technological literacy, which has resulted in an influx of investment in the eCommerce market, levelling the playing field for new competitors," said Nisschal Jaain, CEO and Co-founder, Shypmax.

When asked what factors an investor considers before making an investment, Abhijit Verma, MD, AA Holdings said, "When we start investing, we work with the entrepreneur and their business. I believe in a wide range of awareness and capacity models. We not only supply the necessary funds, but we also provide soft resources experience and networks, which is something I constantly consider. As we all know, 90% of the market is fragmented and transitioning from an unorganized to an organized sector, we consider how we can provide value as a small player, and how I can help. I begin by selecting unorganized players who are micro players and require the capacity, resources, capital, clients, the proper sort of little team, and resources for an efficient business".

"The Indian logistics market is fast evolving, the road logistics market is already contributing to $240 billion taking 75% share of the overall transport market size, according to a report by Economic Times. With Delhivery doing an IPO and a number of others in the space looking at the same route, the investment appetite is substantial. But definitely, questions are asked about the moats for a sustainable and profitable business. From the perspective of venture capital (VC) funding, enough dry powder is available in the market to invest. But the valuations are cut, investors are looking at paths to profitability and moats which are sustainable," Visakh Sasikumar, CEO & Co-founder, Fyn Mobility.

"The competition is increasing. These new-age firms are discussing concepts, but as an investor, I see efficiencies, how my money will be saved and how my money will increase organically.

Abhijit Verma, MD, AA Holdings

Where are the investors more interested?
The Indian logistics industry, estimated to be worth more than $200 billion, is now looking forward to a flourishing post-pandemic future. The logistics business is now equipped with cutting-edge digital technologies and can conduct end-to-end online operations.

International VCs spent more than 4.5 billion dollars in 265 projects in the Indian logistics sector between 2014 and H1 2022. The capital markets will almost certainly boost their investment during the next two to three years.

"The majority of the investment goes into digitisation, capacity, infrastructure, and last-mile supply to cater to the growing demand. There are significant investments in autonomous vehicles and drones as well. However, the sector is yet to see a successful GTM on a global scale, which will further fuel investment in the sector," said Jaain.

The drone industry startups and the EV industries are at a high pace now with multiple expansion announcements and attracting investors into their business. In recent news, Skye Air Mobility, a Gurgaon-based drone company, raised $1.7 million of investment to ramp up its drone deliveries.

"Digitalisation is clearly leading in terms of investment, followed by automation and drones. However, automation will take time to settle in the sector because businesses are still not implementing technology like racking systems in warehouses and their storage facilities today. Automation cannot occur until the required infrastructure is provided. There is still a gap between what we want to achieve and what is really happening. If we want automation, we must embrace digitalisation," Verma added.


India spends approximately 13% of its GDP on logistics, whereas the United States spends 8% and Europe spends roughly 9%. Because of the pandemic that is causing a low-touch economy, we are seeing a major shift toward digitalisation and remote monitoring in the logistics industry all across the world.

"Investments are mostly flowing into product tech which creates differentiation and scalable SaaS models. EVs have been catering to the logistics industry for the past few years now, but enabling these fleets to be smart with the help of data-backed insights through tech-enabled operations is where we need to focus now. Autonomous vehicles and drone investments have slowed down as they are entangled with regulation issues," said Sasikumar.

Is this a good time to invest?
Talking about the current investment market in the logistics sector, industry leaders have diverse perspectives. Some believe that investments are continuing as usual, but others claim that investors are not showing much interest this time, causing firms to go into survival mode.

"Without a doubt, the logistics industry needs the ideal mix of incentives and support measures to speed up its recovery and expansion. Contrary to what the industry believes, however, we do not believe that this issue is impacting start-ups founded on the principles of sustainable development," said Jaain.

"We have seen that the macroeconomic situation plays a spoilsport in fundraising. As an entrepreneur, you don't hit the market with negative thoughts. We believe that a solid business model which is thought through in terms of how it can be sustainable in future and has good traction will attract funding even during tough climates. Larger funding rounds are becoming tougher and business models without a path to profitability will face difficulties while looking to raise," said Sasikumar.

"The majority of the investment goes into digitisation, capacity, infrastructure, and last-mile supply to cater to the growing demand. There are significant investments in autonomous vehicles and drones as well"

Nisschal Jaain, CEO and Co-founder, Shypmax

Verma from AA Holdings believes that investors are investing even now, but that startups need to understand what the investors are seeking in order to fill the gap. "The competition is increasing. These new-age firms are discussing concepts, but as an investor, I see efficiencies, how my money will be saved and how my money will increase organically. If I'm looking forward to my investment, I'm looking for metrics of efficiency and how well they (the companies) understand their structure, system, and people. These are the factors, and this is where they encounter difficulties. The startups will view things from their perspective; they will not see things from the investor's perspective; this is the only difference."

Future of investments
With increasing eCommerce sales, India's logistics sector has had a remarkable expansion since Covid-19. The logistics sector is estimated to be a $320 billion market, with the last-mile alone accounting for 18% of the entire logistics industry in India and expected to be worth $6 billion by 2024.

"India's logistics industry has traditionally emphasised adaptability, agility, and tenacity. With the demand for better quality services steadily rising over the past few decades, it has had a turbulent but promising journey. Through initiatives such as the National Logistic Policy, ULIP, etc. as well as the recent rise in digital awareness, the Indian government has recently placed a renewed emphasis on investing in the nation's logistics infrastructure. This has led to an influx of investment in the eCommerce market, which is predicted to grow in the next couple of years," said Jaain.


In the coming years, growth is estimated to range between 9 and 10%, with a compound annual growth rate (CAGR) of 7-8%. The exponential rise of the Indian economy is likely to accelerate this growth.

"In the future, investors will give more importance to product plus software companies in this space. In logistics, reliability and end-to-end services are the need of the hour. There will be a lot of consolidations happening in the form of mergers and acquisitions which will be interesting to see. Investments will start flowing towards future mobility tech like fuel cells," said Sasikumar.

A number of development factors, including advancements in digital technology, evolving consumer tastes brought about by eCommerce, governmental reforms, and changes in service sourcing methods, are expected to lead to the transformation of the Indian logistics ecosystem.

"From the perspective of venture capital (VC) funding, enough dry powder is available in the market to invest. But the valuations are cut, investors are looking at paths to profitability and moats which are sustainable"

Visakh Sasikumar, CEO & Co-founder, Fyn Mobility

"The transport and logistics industry has a promising future. We must tighten our belts and begin working toward modernisation or digitisation in order to provide future-ready services and value-added services because this sector will change dramatically in the next five years. In any case, the investment is doing quite well. Every year, a billion-dollar investment occurs in the warehousing industry, plus the government is spending money on road transportation, one of the pioneers of the Indian logistics industry," Verma added.

The government's initiatives will propel the logistics sector forward. Investors are actively seeking for firms to invest in, as long as their worries are addressed and the company provides a high return. The future of the Indian logistics sector will witness significant infrastructural expansion, resulting in the sector becoming digital.

Zinal Dedhia

Zinal Dedhia

Zinal Dedhia is the STAT Media Group's Principal Correspondent and a journalism graduate of Nottingham Trent University, UK. She has worked with Radioandmusic.com, ByteDance, and That's TV. Zinal is passionate about air cargo, aviation, and cargo drones. Her email address is zinal@statmediagroup.com.


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