EREDENE CAPITAL PLC

a state-0f-the art THIRD PARTY LOGISTICS business for northern india

The Eredene Group is investing up to INR 854m (£11m) in MJ Logistic Services Limited (MJLSL), which is operating a new 'hub-and-spoke' Third Party Logistics (3PL) warehousing and distribution operation in northern India.

The 'hub' warehouse at Palwal, strategically located on the Delhi-Agra highway, opened for business in October 2009.  In its first phase, the state-of-the facility has 130,000 square feet of ambient storage and 60,000 square feet of cold storage, with computer controlled racked shelving. The facility provides state-of-the art supply chain management through online tracking and ordering and back-office services such as packing, labelling and kitting. When fully operational, it will have a planned 480,000 square feet of dry and cold storage.

The Palwal 'hub' will be linked to two similar but smaller 'spoke' warehouses in Punjab and Uttaranchal with a combined total of 294,000 square feet to cover India's entrie northern industrial heartland.

Spanish olive oil company Acenorca, Indo Lloyd Freight and TATA Motors were among the first customers at the new facility in Palwal.

MJLSL had previously operated from traditional leased warehousing serving approximately 15 corporate clients, including Philips, Mico-Bosch, Godrej, Colgate Palmolive, Hindustan Lever, Coca Cola, ITC and Sharp.

In addition to ambient and temperature controlled storage and racked shelving, its new facilities will also offer online tracking and back office services such as packing, labelling and kitting.

The Eredene Group has acquired a 90% stake in MJLSL (www.mjlsl.com), and this stake will decrease to 74% as agreed milestones are met over a period of five years. This investment in an integrated and modern warehousing operation is based on the growing demand in India for 3PL facilities. Increasingly companies are seeking to outsource the logistics supporting their business – storage, refrigeration, inventory management, packaging and labelling, delivery tracking, customs clearance, freight forwarding, distribution and transportation – broadly any activity other than the manufacture and sale of goods.

A 2009 study by the Associated Chambers of Commerce and Industry of India forecast a rapid growth in 3PL business in India as companies seek better and more cost effective management of their supply chain process. India lags behind developed countries in the use of 3PL and industry and market surveys suggest that this service sector has the potential to grow by up to 20% per annum. The cost of logistics in India is 13% of GDP, which is high by international standards. The key to greater efficiency is outsourcing of logistics services, which in India is very low – less than 10% compared to as high as 80% in Japan.