ESR Investing INR 3B in India Industrial Park JV 

ESR is ploughing nearly INR 3 billion ($42 million) into developing a pair of industrial parks in India, paving the way for the company to add to its warehouse portfolio in the subcontinent, according to an announcement by the Warburg Pincus-backed company. 

The logistics specialist has formed a partnership with a subsidiary of Mumbai-headquartered retail conglomerate Future Group to develop the facilities in Jhajjar and Nagpur, as ESR expands its capacity to serve growing e-commerce demand in the northern and central regions of the country.

The new tie-up comes less than 10 months after ESR joined forces with Allianz Real Estate, the property investment arm of the insurer, in a joint venture to acquire logistics facilities in India, with the two companies dedicating an initial $225 million capital at the time to what is expected to grow into a $1 billion platform.

Warehouse Developer Teams Up With Retailer

The warehouse developer’s tie-up with Future Group, which has 2,000 stores across India, is a collaboration that ESR says will set new standards for the sector.

“We are excited to partner with Future Group in this landmark transaction which will leverage Future Group’s deep understanding of the Indian retail and logistics industries and ESR’s expertise in building smart logistics infrastructure,” Abhijit Malkani and Jai Mirpuri, country heads of ESR India, said in a joint statement.

Bringing ESR’s presence in India to six cities, the two new projects will occupy a combined site area of 3.3 million square feet (306,580 square metres) and will have 1.3 million square feet of floor space, which is to be jointly developed by Future Group’s Future Market Networks and ESR, with the Hong Kong-based company taking the majority stake.

ESR’s Malkani and Mirpuri said that they expect the alliance with Future Group to expand into further geographies within the next one to two years.

Rolling Out Investment Grade Sheds

ESR stated in its announcement that the new parks, which are expected to be completed within 15 to 18 months, will have “institutional grade facilities in line with the company’s “best-in-class modern technologies and know-how”.

“We are enthusiastic about our alliance with ESR to develop state-of-the-art industrial and logistics infrastructure,” said Future Group’s chief executive officer, Kishore Biyani. “ESR shall bring in their expertise to develop these strategically located assets to service India’s rapidly growing logistics industry.”

Biyani added that the parks would address market demand for first-rate logistics solutions.

Future Group, through its Future Market Networks subsidiary, has already been involved in developing logistics facilities, with the company in 2012 having signed a partnership with Mumbai-headquartered Infrastructure Leasing & Financial Services (IL&FS) to develop eight “infra-logistics” parks in India with a combined site area of up to 4.3 million square feet.

Growing in India through a Partnership Strategy

The announcement of the deal with Future Group comes just under three months after ESR set up a joint venture with Mumbai-based developer Lodha Group to develop a $100 million industrial park in Thane, a city just northeast of Mumbai.

That 50:50 partnership is developing 17 buildings over 3.9 million square feet of land to deliver a leaseable area of 1.8 million square feet.

ESR’s 50:50 joint venture with Allianz Real Estate, which was set up in November last year, targets tier one and “selective tier two cities” in India including Mumbai, Pune, Chennai, Bangalore, Hyderabad, Ahmedabad, Kolkata and National Capital Region (“Delhi”).

“India’s logistics sector is coming of age,” Rushabh Desai, Asia-Pacific CEO of Allianz Real Estate said in a statement when the joint venture was launched last year. “The sector is benefiting from a lot of favourable trends, such as stellar consumption patterns, continued infrastructure spending, increasing transparency and the nationwide implementation of a uniform indirect tax system.”