Double whammy: Rains, bleak festive demand to impact warehousing margins

Warehousing players are banking on imports to meet domestic consumption demand in the absence of agri-exports due to lower crop production
If the economic slowdown was not enough, a recent spate of heavy rain has added to the woes of Indian warehousing industry. Bleak demand in the festive season — which has already started and will continue till end-December — could also hit margins.

Parts of Bhiwandi, the warehousing hub that dispatches hundreds of thousands of retail and industrial goods daily to consumers in Mumbai and its surrounding areas, have come to a standstill because of heavy rain.

“Parts of Purna, Kalher and Manholi (within the Bhiwandi area) faced water-logging issues during heavy rain this time. And, the construction quality of warehouses, in some cases, being poor, it affected the facilities. These were mostly general warehouses catering to all kinds of goods,” said Bhavin Gudhaka, owner of Bhiwandi-based KB Warehousing. 

His facilities remained unaffected during the rain, as they are on an elevated space. 

“Businesses did slowdown for a few days in certain parts of Bhiwandi, as it was difficult for goods to come or leave the warehouse,” said Shaliesh Shetty, director, Citi Solutions Warehousing & Distribution.

Bhiwandi is in the Thane district, about 40 km from Mumbai. It not only enjoys proximity to the financial capital of the country but also has strong road and rail connectivity.

Large and organised players such as AllCargo, however, remained unruffled by the inclement weather. 

“All our warehouses are designed taking into account at least 30 years of rainfall data for each region,” said Ankur Minda, general manager (land and leasing) at Allcargo Logistics & Industrial Parks.

Though rains in several parts of the country, such as Maharashtra, Odisha, and Kerala, brought warehousing and logistics activity to a standstill, industry officials see a bigger impact from January next year.

“Heavy rain will adversely affect crop production in the country, and because of this, we (industry) anticipate lower utilisation levels (of agri warehouses) January onwards. Here is where the rain impact will actually come in as demand for storage and in turn exports will drop,” said an executive at Navkar Logistics, who did not want to be named.

The other reason for low utilisation is the not-so-strong festive demand, expected to remain muted even during Diwali and Christmas-New Year season in December, said industry players.

“Although Rakshabandan and Ganesh Chaturthi are not celebrated across the country, these festivals help us gauge the spending sentiment of the consumer. Both these festivals this year have seen need-based spending and hence we do not expect a strong festive consumption pattern this year,” said a Mumbai-based warehousing company official on condition of anonymity.

Festival season in India usually starts in August and runs through December. For e-commerce companies, warehouses are a crucial part of their requirement. With weak festive demand anticipated, demand for warehouses by the e-commerce segment might also be weak.

Warehousing players are banking on imports to meet domestic consumption demand in the absence of agri-exports due to lower crop production. 

According to a Kochi-based player, 85 per cent of manufacturers in the country are small and have no storage facility of their own. "Whatever maybe the consumption size this time, requirement for both finished as well as raw material will be there in the market. Due to this, warehousing companies will get business but margins will be hit,” said a Kochi-based player.

Prices will drop for warehousing but some business for warehouses will surely be there, he added.

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