The board of Allcargo Logistics Ltd on Thursday approved the demerger of its container freight station/inland container depot (CFS/ICD) business into Allcargo Terminals Ltd and the equipment rental, Grade A warehousing, logistics parks and other real estate assets into TransIndia Realty & Logistics Parks Ltd (TransIndia).

Under the scheme of demerger, all three companies will have mirror shareholding, resulting in no change in entitlement of shareholders for each entity.

After the demerger, shareholders will get 1 share each of Allcargo Terminals and TransIndia Realty & Logistics Parks for every 1 share held of Allcargo Logistics. The 1:1 ratio will avoid fractional allotment and benefit all shareholders, Allcargo said in a statement.

Strategic move

The strategic move will position the company to accelerate growth across businesses by creating independent business undertakings, with sharper management focus, better access to right capital, and greater operational and financial flexibility.

Following the merger, Allcargo Logistics would continue its pursuit in international supply chain, express logistics and contract logistics businesses with increased focus on digitization.

The resulting company Allcargo Terminals will be one of the market leaders in CFS business in India and continue to expand its footprint in ICDs. Five out of seven facilities of Allcargo are already on lease and the new resulting structure will make all seven CFS/ICDs completely asset light, positioning the company strongly to drive growth with high return on capital employed.

“We have business units, which have achieved the right scale and seek independence to drive the next phase of growth. The scheme will facilitate strategic growth in demerged businesses and make the company stronger,” Shashi Kiran Shetty, Chairman, Allcargo Logistics, ECU Worldwide and Gati Ltd, said.

“We have grown at 15-20 per cent CAGR on both revenue and EBITDA over the last 15 years and this demerger will set the foundation for the next phase of growth by providing independence to businesses,” he added.

Demerger scheme

Under the proposed scheme of demerger, equipment rental and real estate businesses will move to TransIndia. This will create a portfolio of Grade A warehouses and other assets leased to marquee clients such as Decathlon, Flipkart and Amazon. It will also hold the land for Chennai and Jawaharlal Nehru Port CFS which allow it to become a very robust realty company holding quality assets with long term, sustainable returns. The business will also hold the shares in the JV with Blackstone.

The demerger is expected to be completed over 9-12 months.

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