Allcargo Logistics’ group is planning over ₹1,000 crore of investments by its recently demerged subsidiaries Allcargo Terminals and TransIndia Real Estate, both of which will also be listed on the bourses.
The listing of the two entities is expected in a month, pending approval from the stock exchanges and SEBI.
The $2.5-billion group recently concluded a demerger that was done with a view to unlock value and also bring greater focus to existing lines of business. After the demerger, the parent entity Allcargo Logistics will have the less-than-container-load (LCL) business, in which it is a market leader, express logistics under Gati and Contract Logistics. TransIndia Real Estate will comprise the annuity generating businesses such as logistics parks and other real estate assets.
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Total investments
Allcargo Terminals houses the container freight stations, inland container depots and the first project to be implemented post the demerger will be on a 100-acre logistics park coming up on land in Farrukhnagar acquired from RIL SEZ. The total investment in this is around ₹600 crore, including the cost of land acquisition, and ₹250 crore that will be spent on developing CFSs and ICDs, Founder and Chairman of Allcargo Logistics Shashi Kiran Shetty told businessline.
The project, which is likely to be operational in two years, will be connected to the Delhi-Mumbai dedicated freight corridor, through Haryana Orbital Rail Corp, in which it has a 10 per cent stake. The project will have a total container handling capacity of 250,000 TEUs.
Generating funds
The group companies are generating funds through the sale of older assets. In February TransIndia, for instance, sold logistics parks in Hyderabad, Bengaluru and Goa to Blackstone and has already received ₹288 crore that was used to reduce debt.
More divestments will be taking place — there are agreements to sell stakes in six logistics parks to Blackstone-owned funds — to generate another around ₹400 crore for TransIndia. All of these will go into the company’s planned expansions.
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Shetty said that TransIndia still has two existing warehouses, and it will be acquiring land in Bengaluru, Bhiwandi, JNPT, Kolkata and Chennai where it will be setting up logistics parks.
If more funds are needed for TransIndia then the company could explore other options such as an alternate investment fund or tie up with funding partners.
Expansion plans
Around 80 per cent of Allcargo’s revenue come from its international supply chain business, which is housed within the parent entity. It plans to expand in markets such as Japan, Brazil, China, US, and Germany. It is in the process of implementing a transformational strategy devised by McKinsey that would contribute about 8-10 per cent growth to revenue in the immediate term while helping the company maintain its 20 per cent annual growth in the future.