What is your assessment of the warehousing sector in India?
The warehousing sector in India has been witnessing significant growth in leasing activity because of the strong demand from e-commerce, FMCG and cold storage companies. In fact, the key demand drivers are growing adoption of e-commerce for discretionary and essential purchases and increased use of cold-storage by pharmaceutical companies. The warehousing demand will become more widespread, as e-commerce companies are aggressively expanding their presence in tier-2 and tier-3 cities banking on greater internet penetration. As per Knight Frank India’s Warehousing Market Report 2021, in the warehousing space, annual transactions are projected to grow at a CAGR of 19% to 76.2 million sq ft in FY 2026 from 31.7 million sq ft in FY 2021. The report has also projected that e-commerce sector will occupy the most warehousing space in the next five year FY2022 - 2026 at 98 mn sq ft, 165% more than the preceding period of FY2017-2021. In addition, 3PL companies are likely to take up 56% more space than the same preceding period. As operational efficiency in terms of reduced turnaround time and increased throughput has become crucial to service hyper-competitive market demand, warehousing narrative is shifting from Grade B to Grade A spaces with accelerated adoption of digitisation and automation. The transformation is attracting global capital to the warehousing sector fuelling the development of world-class warehousing infrastructure across the country. The sector which is a key part of the supply chain is finally getting its due.
Is the increasing building material prices especially steel and cement affecting the growth of the warehousing sector? If yes, what is the way out? Your opinion on fixed-price contract
In a world which is still battling with pandemic, the warehousing sector has emerged as the most resilient asset class. That's the reason why leading global funds and domestic developers have invested in projects of warehousing developers and operators. According to JLL Capital Market Update: Q2 2021 research report, the warehousing sector has attracted 55% of the total value of investment deals, ie, $1357 million during April-June 2021 period. However, price escalation of steel has posed hurdles for warehousing developers. Price of steel is critical for the warehousing sector, as steel takes up approximately 40% of the construction cost. The cement price has also gone up because of mounting coal, fuel, pet coke and fuel costs in addition to rising freight rates. At a time when demand for warehousing space is set to surpass supply, increasing material prices have impacted the growth of the warehousing sector to a certain extent. However, sector will continue to absorb the increased input costs for the next 12 months.
What are the value-added services you provide to your clients?
We offer end-to-end digital and technology-enabled transformational supply chain solutions which include warehouse and transportation. Our integrated supply chain transformational capability brings differentiated value to the supply chain dynamics of our clients. We work closely with our clients to bring value-driven changes in the supply chain operations with far-reaching impact.
Which are the sectors that are driving the growth of the warehousing sector in India?
Along with e-commerce, pharmaceutical, automotive, fashion and lifestyle and retail have emerged as the major sectors which will drive growth for the warehousing sector. We at Stellar Value Chain Solutions cater to all these sectors with our specialised supply chain solutions.
How can the government assist in the growth of the warehousing sector? What are the policy and regulatory changes needed?
The domestic warehousing market is fragmented and the majority of the warehousing space is controlled by players from unorganised segment. Various government policies such as production-linked incentives (PLI) to boost domestic manufacturing are fuelling demand for warehousing space. The government's push to digital economy and internet penetration have opened up a new growth spectrum for e-commerce, which is strengthening demand for warehousing across the country. In addition, the government's continued focus on the development of industrial corridors is also driving demand for warehousing across the country. In addition, the government has granted infrastructure status to the logistics sector. It has also initiated a lot of projects to develop the road and port infrastructure which will boost the warehousing sector. The government has been doing whatever it can to grow the warehousing sector.
The growth in the warehousing sector is currently fuelled by e-commerce. Will the sector sustain post Pandemic? Your views
I am of the view that the warehousing sector will sustain momentum in the post-pandemic period as well. E-commerce has become a way of life and a matter of convenience for most of us and the trend will not peter out in future. E-commerce will continue to drive growth in the warehousing sector as e-commerce companies will keep on expanding into new territories, thus creating demand for warehousing space. Both e-commerce and warehousing sectors are looking at a broader and sustainable growth path, going forward. Moreover, a lot of companies will repurpose their supply chain to launch direct-to-consumer (D2C) brands, thus creating demand for new-age supply chain management services.
How are the emerging technologies like IoT, AI, driverless vehicles, WMS, SCMS shaping the growth of the warehousing sector in India?
Technology and automation adoption in warehousing has gained pace because of the growing throughput requirement from sectors like e-commerce, retail, FMCG, etc. Increased demand for service delivery from these sectors is also driving new-age technology adoption in the warehousing sector. Except driverless vehicle which will take time to materialise, all the other technologies such as IoT, AI, WMS, SCMS, etc, will continue to witness a high rate of adoption, going forward. Warehousing companies are switching to technologies like IoT, AI, etc, to augment their human assets and capital and build resilience to counter future emergencies. Technologies like AI and automation are shaping up the concept called smart warehousing by redefining delivery management and storage optimization.
The demand for skilled and efficient manpower will increase. How can the nascent warehousing sector in India nurture manpower for the warehousing sector?
The warehousing operation is going through a transformation to meet the performance-driven demand from e-commerce and other hyper-competitive sectors. The warehousing companies can upskill and reskill the workforce to maximise their productivity so that they can enhance their operational efficiency.
Stellar Value Chain Solutions is emerging as a prominent warehousing player in India. What are your plans for the next three years?
We currently have 12 million sq ft of operational space and have plans to increase the space to 50 million sq ft in the next four years. Moreover, we have plans to expand our reach to all the pin codes of the country in the next five years. We aim to lease 7 million sq ft every year and plans to invest Rs.350-700 crore in developing warehouse.