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.
The Board of Directors of Allcargo Logistics Ltd, at its meeting held today, approved the demerger of CFS/ICD business into Allcargo Terminals Limited and demerger of equipment rental, logistics parks and other real estate assets into TransIndia Realty & Logistics Parks Limited (TransIndia).
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. Allcargo Logistics Limited would continue to be the leader in international supply chain, express logistics and contract logistics businesses with increased focus on digitization. The resulting company Allcargo Terminals will be the market leader 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.
Under the proposed scheme of demerger, equipment rental and real estate businesses will move to TransIndia. This will create a unique portfolio of best in class grade A warehouses and other assets leased to marquee clients. The business will also hold the shares in the JV with Blackstone. Post demerger, the business would have opportunity to attract right pools of capital, as grade A warehousing is in very strong demand and capabilities of TransIndia will provide opportunities for robust growth.
Commenting on the decision, Shashi Kiran Shetty, Chairman, Allcargo Logistics, ECU Worldwide and Gati Ltd. said, “The company takes pride in its heritage and leadership, which have led to a sustained growth in the long term. Now, 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.”
“This is a historic day for the company. We have grown at 15-20% CAGR on both revenue and EBITDA over the last 15 years and this demerger will set the foundation for next phase of growth by providing independence to businesses”, he further added.
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.
Source: Business World