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A promising 2022 to see more tech-driven disruptions in logistics

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Herons Logistics

NEW DELHI : India’s logistics sector is entering the 2022 on a high note given the large investments that flowed into it in 2021. The trend is likely to continue next year as well.

The flow of private equity and venture capital (PE-VC) investment in logistics companies, including large, medium, small and tech-driven firms, jumped by 50 per cent in 2021. The Indian logistics sector plays an important role in the economy, contributing nearly 15 per cent to the country’s GDP and employing over eight million people.

Fund flow

PE-VC investment in 2021 found its way into large logistics companies such as Delhivery, Shiprocket, TVS Supply Chain Solutions and Adani Ports. Large ticket funding went to asset light technology-led startups such as RAAHO, RaRa Delivery, Shiprocket, ElasticRun and FarEye, and intra-city truck marketplace Porter.

The 50 per cent increase in funding value y-o-y speaks of the rising growth opportunities for established companies. The continued rise of e-commerce attracts investors to specialist firms like the IPO-bound Delhivery and also to other technology-led startups that help improve efficiencies for the various stakeholders, said Arun Natarajan, Founder, Venture Intelligence.

Ramesh Venkat, Head – Industry Partnerships, Logistics Sector Skill Council, said investors were attracted to the multi-modal logistics sub-sectors, especially post pandemic.

Logistics and transportation, including e-commerce, have been the champion sectors enabling consumption, levelling up technology, bridging supply with demands. Thrust on cost competitiveness with quality, speed of service with innovations and investments helped the sector tremendously.

Year of collaborations

2022 seems promising. It is bound to witness a great deal of transformation and disruption in the logistics sector. It will be an era of PPP collaborations between Industry-Academia-Governments breathing technologies (Industry / Logistics 4.0) optimising the demographic dividends thereby leading values to valuations, added Venkat.

Anjani Mandal, CEO, Fortigo Logistics, said a combination of external factors have built up over the last five years to create the perfect environment for a technology-leveraged disruption and reconstitution of the logistics industry. The pandemic has accelerated the pace of change over the last two years and has brought into focus every aspect of the supply chain — warehousing, medium and long-distance primary movement as well as last-mile logistics.

The last-mile and warehousing sector has gained substantial importance in the logistics sector due to the rapid growth of e-commerce and a strong move towards direct-to-consumer (D2C). Even large consumer companies have started joining the e-commerce wave with their own D2C initiatives, said Mandal.

The logistics sector is set to grow at over 10 per cent CAGR in the next five years to reach $370 billion. Of this, the road transport segment is valued at $250 billion. With 80 per cent of overall logistics spend going to the unorganised sector, the scale of opportunity is huge, said Nilesh Ghule, Co-founder and CEO, TruckBhejo.

Need for quality

For a growing economy like India, the need for quality logistics for goods to be delivered to various locations speedily and in a good manner is only increasing. This is because on the demand side, several industry stakeholders that traditionally operated offline went online and there has been a huge explosion of D2C brands seeking to bring the very best of ‘Made in India’ products directly to the customers’ doorstep.

The logistics sector is set to witness a transformation led by reforms like GST and e-way; development of supporting infrastructure; change in the perception of logistics being more than just transportation and warehousing but as a specialised function; evolving consumer demands; and emergence of tech-driven operators in this space, who are fast capturing market share, stated a research report prepared by Motilal Oswal.

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