TNT Express has finalised the sale of its loss-making Indian domestic road express business tothe private equity firm India Equity Partners (IEP) to focus on international express to and from
the country in future while IEP plans further logistics acquisitions.The disposal took effect on 30 December 2011 through the IEP logistics subsidiary with financialdetails of the transaction not being disclosed. The company will be led by Abhik Mitra, previouslyManaging Director of TNT India and now CEO of IEP’s ‘Logistics Platform’.
IEP, a Mauritius-based private equity firm, said TNT’s domestic road express business is one ofthe top four competitors who together account for 50% of the market. “The business has a strongnetwork, resulting in a well-known and diversified list of customers, which includes global playersas well as large and medium-sized domestic companies,” it pointed out.
The Indian road express sector was the fastest growing segment in the Indian logistics sector,which grew at over 20% last year and was estimated to be worth Rs 21 billion (€309 million) in2010, IEP said. The sector is characterised by high entry barriers such as large network investmentcosts, it added.
Sid Khanna, Chairman and Managing Director of IEP Fund Advisors, commented: “The acquisition isconsistent with our strategy of investing in Logistics and Infrastructure Services. In theLogistics sector, we see tremendous growth opportunities for mid-sized companies with the requiredmanagement and capital, to scale rapidly and become market leaders.”
KK Iyer, Managing Director of IEP Fund Advisors who previously led Accenture’s logisticsoperations in India, said: “IEP brings together outstanding management talent, the necessaryfinancial capital, high quality governance and best-in-class management processes to buildplatforms that acquire companies to drive growth and become market leaders. We see TNT’s domesticroad express business as a first step in building out our Logistics platform and intend to pursueother exciting investment opportunities in this sector.”
IEP invests in Indian companies and has a diverse portfolio of holdings in industrial andconsumer goods companies. It has assets under management exceeding $450 million raised from aninternational group of endowments, financial institutions, family offices and high net worthindividuals. Focusing on India, IEP currently has a portfolio of 15 companies across domesticconsumption related sectors.
Besides the TNT acquisition, IEP currently invests in three other companies within its existingportfolio across different segments of the logistics sector including the niche liquid logisticsfirm Fourcee Infrastructure, India’s leading cold chain company Swastik Roadlines (Coldex) andOcean Sparkle, a private harbour and seaport service provider. Fourcee Infrastructure, SwastikRoadlines and Ocean Sparkle all grew strongly over the previous fiscal year with increases of 100%,40% and 30% respectively.
IEP and TNT will work together to ensure a seamless transition. The domestic road seniormanagement and most employees (approximately 1,000) will move to the new employer, andon-the-ground facilities, IT and systems and processes will be supported by TNT Express during thetransition process. The new IEP entity will become TNT Express’ preferred partner for domestic roaddelivery in India.
TNT’s exit from the Indian road express market comes five years after the Dutch operator boughtroad trucking firm Speedage under ambitious plans to invest strongly in the country and challengeDHL for domestic market leadership.TNT said in December that the domestic road express businessaccounts for about one third of the company’s overall €100 million sales in India, with the restgenerated by international and domestic air express transportation and other services. The domesticroad operation has thus roughly doubled its revenues since the acquisition of Speedage, which hadhad profitable revenues of €17 million in 2005-06. At present, TNT India has a pick-up and deliverysetup spanning 614 offices, 1,530 vehicles, 34 hubs, 592 depots and sortation centres. The roadexpress operation accounts for a sizeable part of this network.
TNT’s India sales grew from €71 million in 2009 to €95 million in 2010, according to the 2010Annual Report, which highlighted “strong growth” in the Indian domestic business. But a companyspokesman admitted that the business remained loss-making.
Following the domestic disposal, TNT Express India, now managed by Gerry Power, formerly incharge of TNT Express in Malaysia, will focus on inbound and outbound India services. TNT will alsocontinue to provide customer-specific special services, in particular to the health-care andservice logistics segments, while it will use IEP’s logistics subsidiary as its preferred partnerfor domestic road delivery in India.
