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

The monsoon has added to the woes of the warehousing industry, which has already been reeling due to the slowdown. The ongoing festive season has also failed to prop up demand and the industry is staring at huge margin cuts.

Heavy rains recently brought business to a standstill in Bhiwandi, the warehousing hub that dispatches hundreds of thousands of retail and industrial goods daily to consumers in Mumbai and surrounding areas.

“Parts of Purna, Kalher and Manholi (within Bhiwandi area) faced water logging issues during heavy rains this time. As the construction quality of warehouses is poor in some cases, the facilities will impacted by the downpour. These were mostly general warehouses catering to all kinds of goods,” said Bhavin Gudhaka, owner of Bhiwandi-based KB Warehousing. His facilities, however, remained unaffected as they stand at a higher ground.

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

Bhiwandi in Thane district, about 40 km from Mumbai, not only enjoys proximity to Mumbai city but also has strong road and rail connectivity to other parts of the country.

Large, organised players such as AllCargo, however, remained unruffled. “At Allcargo Logistics & Industrial Parks, all our warehouses are designed taking into consideration at least 30-year rainfall data for each region,” Ankur Minda, general manager (land and leasing) at the company.

Though rains in several parts of the country, like Maharashtra, Odisha and Kerala, brought warehousing and logistics activity to a standstill, industry officials see a bigger impact January onwards.

“Heavy rains will impact crop production in the country and due to 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 on the condition of anonymity.

The other reason for low utilisation is the not-so-strong festive demand which is expected to remain muted even during Diwali and New Year period as well, said industry players.

“Although Rakshabandan and Ganesh Chaturthi are not celebrated across country, these festivals help us gauge consumer spending sentiment. 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, it will be interesting to see the amount of business warehouses manage to get from e-commerce players.

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 fall in the “small” category 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,” he said.

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

Source: Business Standard