The fast growing e-commerce sector will drive the USD 167-billion domestic logistics industry going forward and the introduction of the Goods & Services Tax which will unify the markets, will be the biggest push for the sector, says a report.
"The matrix of logistics sector is changing due to the increasing focus on e-commerce logistics and express logistics.
The domestic e-commerce industry is growing at 35- 40 per cent CAGR which has resulted in large players introducing a dedicated e-commerce logistics business," said the logistics report by Singhi Advisors.
Singhi Advisors is a city-based boutique investment bank that focuses on deals on the space. In recent months, logistics players like Patel Logistics, Gati etc have set up dedicated e-commerce logistics arms and tied up with leading players, the report said.
Patel Integrated Logistics, for instance, has set up a special arm called Patel Retail to tap the e-commerce space and tied up with Amazon.
The domestic e-commerce sector was close to USD 20 billion in 2014, up from USD 3.8 billion in 2009. Out of the total, e-tailing itself is over USD 5 billion. It's estimated that by 2030, the e-commerce space will be a USD 300 billion giant, according to various industry reports.
Logistics space has been growing at a CAGR of over 16 per cent over the last five years, despite the industry being highly fragmented with organised players being only 6 per cent.
Globally, the report said the logistics industry is a whopping USD 4-trillion giant in 2013, representing 10 per cent of global GDP.
Another enabler is the government focus on infrastructure such as the Golden Quadrilateral, East-West and North-South corridors, apart from tax break for foreign investors in cold-storage, agri-warehouse and free-trade warehousing zones, coupled with 100 per cent FDI in almost all logistics sub-segments, the report noted.
Areef Patel, vice-chairman of Patel Logistics which is planning to set up special units for airfreight, said, "e- commerce is perhaps the best that the 'depressed' logistics sector could ask for.
Even though 93 per cent of retailing is done in traditional format, estimates suggest that by 2020, e-tailing will capture about 20 per cent share and for this to happen logistics is the most crucial part."