Gati Ltd, the Indian logistics company, has joined hands with Kintetsu World Express Inc (KWE) of Japan to form a joint venture. The Japanese company will invest an estimate of Rs 267.7 crore and hold a 30 per cent stake in the JV, while the remaining 70 per cent will be held by Gati.
The JV is aimed at strengthening Gati’s leadership position in India and establishing its global presence. Moreover, the funds raised from the transaction will be primarily used to reduce debt. The JV company shall be consolidated in the financials of Gati. Mahendra Agarwal, Founder and CEO of Gati Ltd, said: “The partnership will help us leverage KWE’s global customer base, develop world class infrastructure capabilities, enhance our distribution services and further strengthen our leadership position in India. This partnership, apart from providing value for the JV partners, will greatly enhance value for Gati Shareholders.”
Gati will transfer its express distribution and supply chain business to the new joint venture, which will operate under the name Gati-Kintetsu Express. According to company officials, debt worth Rs 330 crore will be transferred to this venture while the rest will be brought under the coastal shipping business.
With this move, Gati plans to restructure its business by creating three strategic business units, including small parcel and warehousing (express distribution and supply chain management), coastal shipping, and cold-chain services and introducing investors in each of these.
The proposed joint venture will combine Gati’s expertise in 3PL and express distribution in India with KWE’s freight forwarding expertise and global customer base. Gati-Kintetsu Express will support large customer base of KWE, who have operations in India, simultaneously strengthening KWE’s distribution capabilities in the Indian market. Together, KWE and Gati will partner in supporting business expansion of domestic and international customers in the Indian market. The JV company shall also invest in high end 3PL facilities, including temperature controlled warehouses.