e Many businesses have already been revisiting their supply chain decisions post-GST implementation. This
may give a major impetus to the logistics industry at the pan-India level. Many companies are expected to
migrate from the current strategy of ‘multiple warehousing’ to the ‘hub-and-spoke’ model as tax treatment
across India will be the same. It would lead to aggregation of state-based warehouses into large regional
warehouses that would offer cost and operational efficiency

e With the consolidation of warehouses, logistical inefficiency declines, the hub-and-spoke model (centralised
distribution system feeding smaller distribution centres) proliferates and service levels improve. From now
on, most business decisions will focus on supply chain efficiency, and not on state-wise tax arbitrage. This,
in turn, may lead to a major business opportunity for organised warehousing players operating large-sized
warehouses in key geographies. The share of organised industrial warehousing players is expected to increase
as they are in a position to leverage the demand for large warehouses that springs from the consolidation due
to GST implementation

e The government’s infrastructure initiatives such as DFCs and industrial corridors across India will support
the warehousing requirement across key locations.

- The development of various industrial corridors such Delhi-Mumbai, Bengaluru-Chennai, Mumbai-
Bengaluru, Amritsar-Kolkata and Vizag-Chennai will help build an efficient industrial infrastructure and
logistics ecosystem across key warehousing locations

- For instance, the development of a DFC from Vasai in Mumbai to Dadri in Uttar Pradesh will support
existing warehousing locations such as Mumbai and NCR. Dadri is within 50-100 km from Ghaziabad
and Gurgaon, key warehousing locations across NCR.

Intense competition, poor connectivity and lack of skilled manpower are major inhibitors for warehousing
industry across India

Warehousing industry is largely fragmented with unorganised players occupying majority share in volume terms.
However, GST implementation will increase the share of organised players in the medium term. Organised players
largely develop pre-engineered building warehouses and provide value-added services, which fetch higher rentals,
compared to the offerings by unorganised players.

Another issue is the lack of land availability with proper infrastructure connectivity. However, the government is
working on connecting key warehousing hubs across India by industrial corridors or DFCs to facilitate the cargo
movement across the country, as majority freight movement in the country is undertaken via road. Development
of industrial corridors is expected to enable proper road infrastructure such as four lanes and lanes to reduce the
transit time. Moreover, lack of skilled manpower in the industry poses a challenge as there are no additional
incentives for the labour.

E-retail to clock CAGR of 17-22% in medium term

CRISIL Research projects the Indian e-commerce sector to clock 17-22% CAGR between fiscals 2020 and 2023.
Consumption slowdown following the pandemic will impact demand in fiscal 2021, especially in the first quarter.
While the sector can witness slower growth in low single digit in fiscal 2021, CRISIL Research expect growth to
bounce back in the medium term.

Cold storage

TCW demand to propel over next 3-4 years

Going forward, the cold chain industry is expected to log 1-3% CAGR (in volume terms) to reach ~37 MT by
fiscal 2025, driven by 6-8% CAGR growth in multipurpose cold storage volume, which accounts for ~33% of the
total TCW volume, at present. In the long run, demand will be driven by dairy products, pharmaceuticals, fruits
and vegetables, and growth of quick service restaurants. Export of meat and seafood too will keep demand
buoyant. Within the multipurpose segment, organised players (accounting for less than 10% of the industry) are
expected to grow faster as key end-user segments prefer them owing to stringent quality requirements and
regulations.

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