Allcargo makes space for Flipkart, Decathlon

P Manoj Updated on January 08, 2019

Bracing for bigger battle, retailers lease warehouses at multiple locations

Walmart-owned Flipkart and French sporting goods retailer Decathlon SA have separately leased warehousing space from Allcargo Logistics and Industrial Parks Pvt Ltd (ALIPPL) at multiple locations, as retail players brace for the next round of battle in the world’s fastest growing major economy.

The long-term lease is one of the biggest warehousing lease deals signed yet by retail players in the Indian logistics space, indicating their confidence in the growth potential of the competitive Indian online market place.

Allcargo Logistics and Industrial Parks, a unit of Mumbai-listed Allcargo Logistics Ltd, is developing 6.5 million sq ft of warehousing space spread across the National Capital Region (NCR) Delhi, Bengaluru and Hyderabad. “Of this, we have signed up for 3.5 million sq ft – 2 million sq ft with Flipkart, one million sq ft with Decathlon and 0.5 million sq ft with other customers,” Allcargo Logistics Chairman and Managing Director, Shashi Kiran Shetty told BusinessLine on Tuesday.

“The balance three million sq ft would be leased out by the end of the next financial year,” he added.

Annual rentals

Allcargo will spend about ₹1,000 crore in developing the 6.5 million sq ft of warehousing space by the end of the next financial year.

“From FY21, we will have over ₹120 crore of annual rental income from the lease of 6.5 million sq ft of warehousing space,” said Shetty, adding that from September this year, the firm will start receiving annual rentals of about ₹60-70 crore from leasing space to Flipkart, Decathlon and other customers.

Flipkart has leased two million sq ft of warehousing space in Farrukhnagar (NCR), Malur (Bengaluru) and Patancheru (Hyderabad), to help bolster its distribution network and storage capabilities.

Decathlon has leased one million sq ft of space in Malur near Bengaluru and plans to convert it into a centralised warehousing hub. Allcargo Logistics and Industrial Parks will raise its warehousing capacity to 15 million sq ft over the next three years.

“The warehousing sector in the country is growing rapidly. ALIPPL has been created to exploit this opportunity as a real estate developer using some 500 acres of land it had acquired over the last five to seven years,” said Shetty.

Deal rationale

Retailers, according to Shetty, are consolidating their warehouses with the rollout of the Goods and Services Tax (GST). “Instead of having multiple facilities at different locations, they are consolidating into large facilities at one or two locations to cater to the boom in business,” he said.

“The key objective behind the latest warehousing lease deal is to develop infrastructure in India which will reduce logistics cost and facilitate ease of doing business. With these deals, we aim to create an industry benchmark in the warehousing sector, the way we have created yardstick in the container freight station and inland container depot segments. The lease deal will signal a transformation of the entire warehousing industry,” he said.

Allcargo is also talking to industrial houses and manufacturing companies who are looking to consolidate their multi-location third- party logistics and supply chain requirements into fewer facilities, he added.

Published on January 08, 2019
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