Initiating Coverage: Allcargo Logistics Ltd
06-04-2023

Allcargo Logistics is a logistics player engaged in providing integrated logistics solutions and offers specialised logistics services across multimodal transport operations, inland container depot (ICD), container freight station (CFS) operations, contract logistics operations and project and engineering solutions.

It operates multimodal transport under ECU Worldwide which is the global leader in Less than container load (LCL) consolidation, having a 15% market share.

While operates express distribution and contract logistics under GATI and Avvashya CCI providing entire supply chain solutions.

Allcargo also operates ICD/CFS at various ports with static capacity of 26,000 TEUs and logistics park at various locations with coverage of 6 Million sq ft.

Industry Overview

Global logistics industry is expected to grow by CAGR 6% till FY28 to become more than $14 Trillion industry. Ocean freight consists of majority movement in transport industry.

Indian logistics currently account for 14.4% of GDP, with various government initiatives to reduce it to 8-10% of GDP. Unorganised sector accounts for over 90% of the logistics sector, which is provides huge opportunity for organised player to grow along with rising GDP and income of population. Surge in India as manufacturing hub and rising share in Global trade is going to further help Indian logistics players.

Business

Multimodal Transport Operations (MTO)

ALL’s MTO segment involves NVOCC (Non-Vessel Owning Common Carrier) operations related to LCL consolidation and FCL forwarding. ALL is the global leader in LCL consolidation with a 15% share from less than 9% a decade ago. LCL leadership provides a strong base for FCL expansion. LCL is more profitable than FCL as it has the value-added service of being a cargo consolidator. LCL market has a pass-through in freight rates while in FCL there is some linkage between freight rates and margins.

Contract and Express Logistics

ALL acquired stake in GATI logistics to enter in partial truck load (PTL) segment, where it provides express distribution and supply chain solution through land, air and rail logistics, supply chain management (SCM), ecommerce logistics, freight forwarding and cold storage transport and warehousing. Under Avvashya CCI it operates contract logistics where it transport, warehousing and supply chain solution to various companies. It serves 8 out of 10 largest auto, pharma and textile companies, as well ecommerce players. Company has more than 10 million sq ft of warehousing and distribution space catering various industries and products.

Container Freight Station (CFS) & Inland Container Depot (ICD)

ALL owns and operates 7 CFS/ICDs (capacity of 8,50,000 TEUs) across key locations like JNPT, Mundra, Chennai, Kolkata, and Dadri. This segment’s operations involve import/export cargo stuffing and de-stuffing, customs clearance, and other related ancillary services to both importers and exporters. This segment will be a beneficiary of port volumes and trade growth in India, with major ports handling higher than 80% container volumes in country.

Logistics Park

Company operates Logistics Park across National Capital Region (NCR) Delhi, Bengaluru, Hyderabad and JNPT in Mumbai Metropolitan Region (Mumbai), of which 5.5 Million is sq ft has been sold to Blackstone for 400 Cr, to reduce its debt. The company will retain assets at NCR, Hosur and MMR region and is building a greenfield ICD in Jhajjar, Haryana, to capitalise on the hinterland container traffic in the NCR region.

Business Performance

Check 10 year X-ray

ALL is going to be demerged into 3 units, namely ALLCARGO LOGISTICS (ACL) operating in international supply chain, multimodal transport, express and contract logistics. ALLCARGO TERMINALS (ATL) operating asset heavy CFS/ICD business and TRANSINDIA REALTY (TRLPL) operating logistics park and crane rental business. Demerger is expected to be completed by April/May 2023.

This will help ACL achieve better return ratios due to spin off of asset heavy business, while working on integration of LCL/FCL and contract logistics ecosystem.

Other two segments will provide company with key infrastructure to provide value added services, and cash flows.

Competition

ALL faces competition in International transport (MTO) from various foreign players like , under contract logistics & GATI (last mile delivery) it competes with domestic players like VRL, Mahindra Logistics, TCI Express in domestic market.

Risks

Extended global uncertainty and recession could affect MTO segment.

An inability to turn around an unprofitable segment, such as GATI, could negatively impact the company's financial performance by reducing its revenue and profitability

Market share loss in LCL (Less than Container Load), and increasing competitive pressure in Express & 3PL (Third-Party Logistics) business.

Logistics and supply chain solutions provider, ALL faces operational risks such as disruptions in transportation, port operations, or delays in customs clearance.