Kool-ex, a specialist in pharmaceutical cold chain solutions in which Tata MotorsNSE 0.46 % recently invested, is on a significant expansion spree with a planned investment of more than Rs 300 crore.
Thanks to the growing demand for cold chain logistics in the pharma sector, the company will be doubling its fleet to 800 reefer trucks in the coming two years at an investment of Rs 140 crore, the company’s MD, Rahul Agarwal told ET. It is also investing Rs 90 crore in a 25,000-pallet capacity cold storage warehouse for pharmaceutical products near Pune, which will be the largest of its kind in India, Agarwal said, calling it a “very lucrative” business. The funds will be raised through debt, he said.
The company recently procured 200 completely built reefer trucks from Tata Motors, increasing its fleet size to 400 and becoming the largest player in India in pharmaceutical cold chain logistics. The Rs 75-crore structured deal was funded through Tata Motors Finance with a mix of equity and debt.
Depending on size, a reefer truck costs anywhere between Rs 25 lakh and Rs 45 lakh.
Kool-ex is betting on the draft guidelines on distribution practices for pharmaceutical products released by the Central Drugs Standard Control Organization (CDSCO) in July 2018. Once enforced, these guidelines stipulate transportation of pharmaceutical products in accordance with the storage conditions indicated on the label, among other stringent requirements. This will result in increased demand for cold chain logistics from pharmaceutical companies, Agarwal said.
Other cold chain players like Snowman Logistics and DHL Smartrucking too have invested in pharmaceutical logistics recently. Meanwhile, AllcargoNSE 0.52 %, another cold chain player, is awaiting further clarity before making any financial decisions
Tata Motors expects the demand for reefer trucks to pick up after these guidelines kick in and is open to more structured financial solutions like the one with Kool-ex. “Once the new guidelines kick in, we will see the demand for the reefers grow strongly and we expect the demand to go up strongly from the current level of 1000 units (a year) ... It can be as high as 2-3 times if not more in the days to come,” it said in response to an email query.
The cold chain logistics industry expects these guidelines to kick-in before the end of 2019. K Bangarurajan, Joint Drugs Controller at CDSCO, while non-committal of any timeline, told ET that it could happen before that too.