Allcargo consolidates position in contract logistics; buys out partner’s 39% stake
Company board approves exit from non-core clearance business, selling entire stake held in the entity. Deal will set path ahead for synergies with express business under Gati.
The board of Allcargo Logistics has approved the plan to acquire 38.87 percent stake from its partners at an enterprise value of ₹373 crores. With the acquisition, Allcargo Logistics will take its stake to 100 percent in the contract logistics business.
“The acquisition reflects the group's vision for robust growth by creating an effective synergy between contract logistics and express distribution,” reads the release.
The acquisition price is based on the agreement that was signed with ACCI JV partners in 2016 and with tremendous growth in this business over the years, this proves to be a highly value accretive acquisition.
Shashi Kiran Shetty, Founder & Chairman, Allcargo Group said, "This important acquisition will offer us management control and facilitate strategic decision-making. This will help us enhance service delivery capabilities to drive growth. The business has witnessed robust growth over the years diversifying into several new industry segments. We can also expect more synergy between contract logistics and express distribution to further strengthen group’s position in the fast-growing express and contract logistics space.”
Allcargo’s Contract logistics business is engaged in managing inventories and providing third party supply chain solutions to marquee Indian and international customers across chemical, auto, e-commerce and other industries. The business has a total space of over 5 million square feet under its management and reported an EBITDA of ₹ 31 Cr for the quarter Q3 FY22-23.
In addition to this, the impending acquisition of KWE’s stake in Gati will enable closer collaboration between the two businesses thus enabling them to be in a better position to leverage each other's strength with Allcargo buying out entire stake of partners in both businesses.
The board also approved sale of smaller non-core customs clearance business. Allcargo Logistics will sell its 61.13% stake in this business for an enterprise value of approx. ₹ 42 Cr. Further, the company declared an interim dividend of ₹3.25 per equity share for FY23.
Commenting on the overall developments, Shetty, added, “We continue to exit non-core businesses and consolidate our core businesses. Post demerger of Allcargo Terminals and TransIndia, which has already received NCLT approval, the company shall now have two distinct business segments under International Supply Chain and Express & Contract Logistics. This would lead to sharper focus and enhance growth prospects for the group.”