Logistics

Snowman Logistics re-starts expansion plan after exiting deal with Adani Logistics

P Manoj Mumbai | Updated on May 15, 2020

Mumbai-listed Snowman Logistics Ltd, a unit of Gateway Distriparks Ltd, has re-started expansion plans after the promoter called off the deal last week to sell its 40.25 per cent stake in the cold chain company to Adani Logistics Ltd.

The Rs 60-crore expansion plan involves setting up new cold storage facilities at Siliguri in West Bengal and Coimbatore as well as doubling the capacity of the facility at Krishnapatnam in Andhra Pradesh besides some small projects within existing facilities, Snowman Logistics Chief Executive Officer Sunil Nair, told BusinessLine. The expansion plan will be funded entirely through debt.

“We have already acquired land in Krishnapatnam about 10 km away from Krishnapatnam Port and in Siliguri. In Coimbatore, we have shortlisted the land. That’s when we held everything. Now, we will re-activate that and go ahead,” Nair said.

Before the deal was scrapped, Adani Logistics Ltd, a unit of Adani Ports and Special Economic Zone Ltd (APSEZ), acquired a 26 per cent stake in Snowman Logistics in March through a mandatory open offer to public shareholders.

During the open offer, Mitsubishi Corporation and Mitsubishi Logistics Corp sold their 9.36 per cent and 2.17 per cent stake respectively in Snowman Logistics to Adani Logistics and exited the company. Following the exit, Mamoru Yokoo, a non-executive director, representing the Mitsubishi entities ceased to be a member on the company’s board from May 11.

International Finance Corporation (IFC), a member of the World Bank, also exited the company by selling its stake of 6.77 per cent prior to the open offer. IFC didn’t have a board seat on Snowman.

Demand for cold storage

Snowman continued operations during the lockdown period as the cold storage and warehousing business came under the essential services category.

Snowman’s cold storage and warehousing business grew by 10 per cent in April compared to March as a dip in consumption and exports raised storage demand.

“In warehousing, there has been a growth in demand primarily because the consumption has come down, so lot of production has to be stored in cold storages. And, exports have slowed down because of shortage of containers. Thus, the storage and warehousing business has grown by almost 10 per cent in April than what it was in March,” he said.

Further, this year the prawn culture crop has been robust but exports are slow leading to more storage of seafood, thereby increasing Snowman’s core business of cold store warehousing.

The transportation business, though, was hit by shortage of drivers and also because the movement was very less because of lower consumption, he said.

For one-and-half month, there was no production and also most of the dine in restaurants could not start, most of the retail consumption of frozen food was not happening, lot of hotels could not start, so there is an overall consumption reduction.

“The 10 per cent increase that we had in storage business is just a pipeline that is filled, the moment you open the tap, that 10 per cent will go and we will go back to 84-85 per cent of utilisation which we had projected for the year,” Nair said.

Snowman has started a three-year contract with an e-commerce company for delivering perishables. “We don’t do the home delivery part, we do sorting, grading of fruits and vegetables, eggs and frozen stuff and we deliver it to their hub from where they deliver it to homes. The complete back end is managed by us, right from collecting from farmers. So, this is one model which we believe is the way forward for us, so we are focussing on that model where we tie-up with e commerce companies who deliver to homes. We are in talks for more such deals,” Nair stated.

The CEO said he had no clue what Adani Logistics planned to do with its 26 per cent stake acquired in the open offer.

“Gateway Distriparks is the sole promoter of Snowman now. For now, we are told, you go ahead and expand. So, we are going ahead,” he added.

Published on May 15, 2020

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor