CDC banks on rail to share the wealth

Bihar, located to the east of Uttar Pradesh is even more poorly served. Pristine's new terminal in Patna, the state capital, has the potential to revitalize local communities by allowing farmers to get their produce to market more easily.

Last week, CDC Group, a UK-based development financial institution, endorsed the notion of economic empowerment through logistics by investing $25 million in Pristine. The company, which provides rail freight services in rural and under-served parts of the country, previously secured approximately $10 million from local PE investor UTI Capital in 2012.

"Efficient terminal infrastructure is necessary for businesses to be able to trade," says Rohit Anand, an investment director on CDC's direct equities team. "Given the large distances in India, and sometimes challenging road conditions, rail is the logical mode of transport for containers and bulk goods moving from regions located deep inland."

The state-owned Indian Railways opened up its freight transportation segment to private investors under public-private partnerships (PPP) a few years ago. It generated about $15 million in revenue from freight transport in 2014. Pristine's operations are profitable and the company will use the new investment to develop eight greenfield terminals across northern, central and eastern India. These will include both bulk and container handling facilities.

"Indian Railways has made very positive noises about private investment in rail infrastructure and we hope this will translate into a smooth regulatory environment. Local governments are encouraging of such improvements as it helps create business and employment opportunities in the region, "adds Anand.

CDC's investment will not only create nearly 1,500 jobs directly but also a further 400 shorter-term construction jobs. In addition, the company plans to develop a food park in Bihar that will provide work for 1,800 more people. One of India's largest fruit, vegetable and dairy producing states, Bihar is held back by the absence of fast, reliable and temperature-controlled transportation services. The park will bring food processing, storage and modern transport services to rural communities.

In recent years, Maharashtra and the New Delhi National Capital Region have routinely accounted for approximately half of the foreign direct investment flowing into India. The combined share for Orissa, Uttar Pradesh, Bihar and Madhya Pradesh - Pristine's areas of focus - has been in the low single digits.

CDC expects Prinstine's operation to grow significantly over the coming years. The group has already brought in a rail freight industry veteran to sit on the company's board.

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• Topics
• Expansion
• South Asia
• Infrastructure
• Transportation
• Infrastructure
• India
• Growth capital
• Logistics
• CDC Group