The Indian warehousing industry is still at a nascent stage. It is yet to develop its design, automation and technology. However it seems to be evolving rapidly, with Grade A and B warehousing stock expected to grow at a CAGR of 21 per cent year-on-year taking the total tally of warehouse space in India to 297 million sq. ft. by the end of 2021.

Embassy Industrial Parks was formed to address the challenges of companies grappling with the building and management of industrial and warehousing spaces all over the country. The company is planning to set up about 8 to 10 industrial parks around eight key-cities spread across the country.

Aditya Virwani, COO, Embassy Group speaks to EPC&I about Embassy Industrial Parks and how it is set up as independent business vertical, professionally managed, equipped with the right resources, skill sets, and necessary empowerment.

Warehousing, which was once sidelined in the larger scheme of things, is now rapidly gaining prominence across the Indian realty sector. What are the factors, at the micro and macro-economic level that are coming to play, making warehousing an attractive proposition for investors?

As per the Economic Survey 2017-18, the Indian logistics sector provides livelihood to 22 million-plus people and improving the sector would facilitate a 10 per cent decrease in indirect logistics cost, leading to a growth of 5-8 per cent in exports. Further, the Survey estimates that the worth of Indian logistics market would be around US$215-billion in next two years compared to about US$160-billion currently.

The boom in next couple of years is expected largely due to the implementation of Goods and Service Tax (GST), easing of foreign investment norms, increasing globalization, growth of e-commerce, positive changes in policies and government initiatives like ‘Make in India’. Given this background, the interest on behalf of the foreign funds is likely to remain robust.

The sector will see a lot of deals, especially in the logistics real estate space, which will see an ocean of change considering that the funds are looking to build high quality yield assets with top notch tenants. The sector on the whole will see a lot of investment activity coupled with consolidation down the road.

What is your investment into the warehousing (Industrial Parks)?

Embassy Industrial Parks is investing US$1.00-billion to address the challenges of companies grappling with inefficient industrial and warehousing spaces in a large, diverse and geographically distributed market like India. We already have presence in six key cities – Delhi, Mumbai, Bangalore, Pune, Hosur, and Chennai. We are rapidly moving to newer markets also.

We aim to build 35 million sq. ft. of industrial and warehousing space over the next three years across India. We have already signed MoUs with governments of Haryana and Kolkatta for over a billion rupees.

In your opinion, do you think that pan-India players offering A-grade space have an advantage over more localised players, albeit they too may be offering A-grade spaces?

Since our inception, it has been a learning curve for us. Having a first mover’s advantage means you enjoy that position till others catch up. The flip side is that you apply all new innovations and strategies before others and, hence, have no chance to learn from other’s mistakes.

We take pride in our ability of identifying the future a little before it’s time. This allows great learning for us as well for the entire industry. The most important learning has been to secure strategic land locations in key micro markets at the right micro market price and zone.

We have bought important parcels of land across the country; each state in India possesses unique challenges like land-laws, approvals, conversion-process, titles related diligence and cultural challenges. We have learnt to deal with these in any part of the country.

We have also mastered construction of Grade A quality facilities and further know-how to maintain and manage these developments. Over the years, we have built a team equipped for holding out these functions to our customer’s satisfaction.

According to industry reports, ~90 per cent of traditional industry segments (Warehousing) are unorganised. Do you see this shifting anytime soon? If so, what are the factors for the shift?

Most of the warehousing today is non-compliant and are not well constructed. There are maintenance issues with leaking roofs and chipped floors; and, hence, the demand for grade A warehouses.

The key drivers for warehousing and logistics services is the growth of MNCs, emergence and growth of 3PL and 4PL, FDI, e-commerce, policy changes at government level – Make in India, etc., Internet penetration into villages, robust trade growth, globalization of manufacturing systems and streamlining of the indirect tax structure. These comprehensive supply chain strategies are the ones that increase the need for integrated logistics solutions.

The demand drivers considered for warehousing market are the manufacturing and consumption sectors. With the implementation of GST and resulting uniform taxation across states, it will result in consolidation of supply chain and, hence, warehousing capacities. The industry will move from unorganized players into larger, modern and technologically advanced warehouses.

Would you throw light on the value-addition that you offer at your various industrial parks beyond the traditional transportation and storage services? How are you leveraging technology for efficiency gains, and offering integrated solutions?

Emerging new technologies are creating strategic opportunities for organisations to build competitive advantages in various functional areas of management, including logistics and supply chain management. However, the degree of success depends on the selection of right technology for the application, availability of proper organizational infrastructure, culture and management policies.

New technology concepts, such as fast track technology, PEB, precast and sustainable technology are few innovations leveraged by our facilities. Moreover, the industrial parks, apart from the world-class warehousing and logistics facilities, will boast of a host of special amenities such as truck parking, canteens, rest areas, dormitories, business centres, etc., ensuring that each park becomes a self-sustaining business environment. Also, we are environmentally conscious and IGBC compliant.

As competition intensifies, how would you differentiate yourself from the rest of the pack?

Embassy Industrial Parks was a start-up not very long ago but, today, in various formats, it largely represents the evolution of warehousing in India as an industry. An organizational culture as such has to be deliberately worked on. We are fortunate to belong to a mothership – Embassy Group – that possesses such values.

We collaborate our internal and external resources to bring expertise and knowledge banks into the organization. We are constantly using digital platforms to maintain process where every area of the company can be managed and tracked.

Our partners are well-versed with latest and future trends in the construction industry. Over time, the team has become intuitive but we depend on data-analytics. So, the project and procurement management are built on it.

Our approach is customer driven, so at all times, we have to offer transparency and customization. We have to be risk averse and provide further mobility to our projects. So, we strategize and have a long-term perspective.

Lack of mechanised material handling capacity often hinders container movement and restricts efficient intermodal transportation. How are you addressing this issue?

The warehousing in the other countries is a fairly established concept. These warehouses are highly automated and quite advanced. Infrastructure is another key area where India and the West stand poles apart.

Our counterparts in the developed countries are equipped with modern equipment for various tasks, such as material handling, loading and unloading of goods. Although India is quiet progressive in their attempt to develop this, technology stands to be another differentiator.

Our Indian warehousing industry is still at a nascent stage. It has access to abundant and cost- effective labour but the mechanism to train the staff is not efficient. The Indian warehousing sector is yet to develop its design, automation and technology. However it seems to be evolving rapidly.

Would you throw light on the documentation and procedures required today – to what extent are they a deterrent for future growth?

The Indian government has implemented investor friendly policy decisions. GST and Make in India campaign have facilitated infrastructure growth, especially for the logistic business. Since the government is in decision to launch multimodal logistics parks and a host of such policy level changes allowing ease of business.

There is an on-going change in the documentation process and time taken for procedures. With complete consolidation, the future looks extremely bright.  Technological change will continue to be expanded in the newly acquired ‘Infrastructure’ status and will further simplify approval process for affordable projects, create clear guidelines, and increase transparency in the segment. This will further make this market more accountable.

Would you throw light on the various industry segments that you cater to at your warehouses?

Our modern, well-planned, technology-enabled industrial and warehousing solutions are targeted at industry verticals like E-Commerce, 3PL, Automobile Ancillaries, FMCG and Retail.

What are some of the pain points for leading players such as you?

In a highly price sensitive market, acceptance of the premium required to operate out of modern Grade A spaces could be seen as a challenge initially. However, when companies realize the lifecycle benefits in terms of long term costs and operational efficiency, we feel confident that there will be a significant upshift in demand for such space.

Sustained growth in the e-commerce space has continued to support logistics volume growth over the last five years. However, various e-commerce players are expanding their own logistics networks and warehousing facilities. Do you see a lowering outsourced spending – as a proportion of net revenue – by e-commerce players going ahead?

The constant dilemma with warehousing is the need to supply the ever-growing demand. One is increase in adoption of e-commerce as a mode of purchase by a large young population across different product categories. Second, India is undergoing a massive urbanization and demographic change creating a huge wave of consumer demand over the next decade.

These demand forces are complemented by policy measures like GST implementation, Infrastructure status, Make in India, etc., thereby creating a huge demand for organized warehousing spaces in the country.

There is great demand for systematic and strategically planned warehousing setup for market players. Warehousing industry has remained unorganized for a long period of time and relevant industry providers not only understand needs of customers but also deliver best-in-class industrial and warehousing solutions to them. So, we do not see any lowering of outsourcing.

Lastly, would you provide us with your view on the way forward – how positive are you and what is it that your customers can look forward to from Embassy Industrial Parks?

We are very positive about our five-year vision. We are planning to set up about 8 to 10 industrial parks around eight key-cities that include Mumbai, Delhi, Bangalore, Pune, Chennai, Hyderabad, Kolkatta and Ahmedabad. There will be more than one park in Delhi and Mumbai; nine parks, over the next three years, which will total to 35 million sq. ft. of potential development. We plan to buy land with our equity line of US$250-million.

“We aim to build 35 million sq. ft. of industrial and warehousing space over the next three years across India. We have already signed MoUs with governments of Haryana and Kolkatta for over a billion rupees.” 

“There will be more than one park in Delhi and Mumbai; nine parks, over the next three years, which will total to 35 million sq. ft. of potential development. We plan to buy land with our equity line of US$250-million.”