Augmenting efficiency and impact of integrated logistics

2022 will see India’s largest integrated logistics player, Allcargo Logistics, bring in razor sharp focus and cutting edge efficiency into its business as it crafts some significant organizational changes. Like Quantas Airways, Crompton Greaves, and the recently announced demerger of Johnson & Johnson, the Mumbai headquartered global conglomerate too recently announced a restructuring of the organization through a scheme of strategic demerger of its business.

Since being listed on public markets, the more than USD 2 billion company has demonstrated strong growth between December 2006 to September 2021, increasing revenue to 14 times CAGR and EBITDA to 11 times CAGR. Having taken bold steps in the past to create strong global and domestic presence with the strategic acquisition of Gati Ltd.; the acquisition of the contract logistics and warehousing division of Avvashya CCI; and having forged highly successful partnerships in Tianjin, South Korea and the Nordic countries, all eyes were on the integrated logistics leader’s next big move.

Augmenting efficiency and impact

The historic step of the demerger will create two more publicly held companies through corporate action, and Allcargo will operate as three listed companies and shareholders of Allcargo Logistics Limited will get one share each of the two new companies for every one share they hold in Allcargo Logistics Limited.

Allcargo Terminals Limited (ATL) will consolidate its leadership position in the Container Freight Stations (CFS) space and continue to expand the footprint in CFS-ICD by exploring opportunities in India and abroad. It will focus on being completely asset-light, enabling growth with high returns on capital employed.

Transindia Realty & Logistics Parks (TRLP) Ltd will comprise of logistics parks, crane rental services, and other asset-heavy businesses. In the recent past, some marquee investments in Grade A warehouses across India have been made and through this entity, endeavours to expand the nationwide logistics parks footprint would continue.

The current publicly listed parent company, Allcargo Logistics Limited would continue to be the leader in NVOCC and LCL consolidation, international supply chain, express logistics, and contract logistics businesses with an increased focus on digitalization and an asset-light business model. It would also retain the ownership of the shares of its global subsidiary, ECU Worldwide, Gati Ltd. and the shares of Avvashya CCI Pvt. Ltd.

Significance of the demerger

Demergers are known to bring in huge benefits that arise from the simplification of the business. Likewise with Allcargo, this move will allow the businesses to gain strategic independence, and financial and operational flexibility, enabling greater individualized focus to manage, strategize and analyze.

This move is in keeping with the brands’ customer-centric approach, whereby customers will benefit from the augmented and individualized attention paid to enhancing the different verticals. The new corporate structure is slated to provide greater flexibility to raise capital, and help bring in strategic partners for the businesses.

To know more about the demerger, watch Mr. Shashi Kiran Shetty, Chairman of Allcargo, ECU Worldwide and Gati, share his views in this video:

Conclusion

Coming on the heels of two significant strategic acquisitions and partnerships; along with the clear focus on digitalization, being agile and customer-centric, the demerger scheme is a sure sign of a well-thought out plan for sustainable growth and success.