The ₹20,000 crore Allcargo group is looking towards the upcoming FY26 with major changes in the group including splitting the international and domestic business which will happen by April 2025. The logistics industry is also witnessing interesting shifts both globally and domestically. businessline spoke to Ravi Jakhar, Chief Strategy Officer, Allcargo Group on the company’s business and industry trends. Some excerpts:
Allcargo has been on a move towards demerger of business entities. In this context, I suppose FY26 will be something different for your group. Can you explain your strategy behind this? How is this going to benefit the the group?
The first part of the demerger has already been implemented with Allcargo Terminals and TransIndia Real estate already got listed more than a year ago. The current scheme is about splitting the international and the domestic business, which will happen by April 2025. We will have Allcargo ECU limited, which will be the international business, and Allcargo logistics will basically be the domestic business, which is express and contract logistics.
Once this process is completed, the corporate structure will mirror the management structure, which is already separate. We have a separate management team driving the international business, and we have a separate management team driving the domestic business even today.
The strategy is to bring sharper management focus, create independent companies, and that ultimately creates value for all stakeholders. So, that’s been the intent, and the process has been going well. Now, we are already with the NCLT. Stock exchange NOCs have already come in, and the process should conclude by April 2025.
How will this lead to creation of more value for your stakeholders?
A lot of inefficiencies and cost duplications go away. For example, we have the contract logistics business, which has its own support functions today, because it is part of a separate company Allcargo Supply Chain. And the express business has its own set of support functions, such as in the finance side, because accounting needs to be done for the operating subsidiary, which is Gati Express Supply Chain.
You require a board to be operational, and then you have a listed entity Allcargo Gati for which also, you know, we need to have all the management expenses, the financial support and various things, consolidation, and a lot more work that needs to be done.
Now, the new domestic entity will be the listed entity, and the operating entity would be the same, and one same unit for both the businesses. So, there are no subsidiaries, there are no duplications in management or the support function structure. So, all those synergies will basically make it more efficient and more effective.
What, according to you, are the emerging trends in both international business?
In international business there are new trends. One, we’ve been finding diversification of supply chains. People are looking at moving away from China into India, Indonesia, Vietnam, Turkey, Mexico. There’s the concept of near-shoring. Chains. This is something which benefits a player like us on international trade, which has a presence across all the key countries.
The second trend that we see is an increase in cross-border e-commerce on the international business. This increase in cross-border e-commerce is largely Less than Container Load (LCL) cargo in nature as these are small and medium enterprises shipping their goods across to Amazon warehouses or other similar fulfilment centers to US or parts of Europe.
The third trend is an increased digital adoption, this is also helping our business growth as we are the most digitised company in our domain. The fourth trend is the generative AI which is helping greater automation.
How have been the trends in the domestic logistics industry?
On the domestic side, the fastest growing segment of e-commerce now seems to be quick commerce, which is all your Blinkit and Zepto and all these players who are growing rapidly because customers are getting used to these new consumption patterns. And in that context, our contract logistics business benefits immensely. We manage both the fulfillment centers and even stores for these quick commerce players. And I think our business has scaled up like 10 times in the last two, three years in this segment.
Can you give a perspective on your group’s business growth?
Since the company went public over the last 16-17 years, the average growth rate on revenue would be about 16-17 per cent. The growth in the bottom line would also be about 14-15 per cent. We believe the long-term growth trends will remain steady, though we don’t share any forward guidance at this point in time.