The founder and chairman of Allcargo Logistics on building a business with a starting capital of Rs25,000, the importance of humility and his three guiding business principles
When you meet Shashikiran Shetty for the first time, he comes across as a regular guy, not the head of a billion-dollar company. Dressed in a striped white and pink full-sleeved shirt with grey trousers, the moustachioed 60-year-old eases into conversation without any trappings of formality.
He stresses on the importance of humility, on staying grounded as you get more successful in life—lessons learnt from his deep faith in spirituality and daily prayer.
The founder and chairman of Allcargo Logistics Ltd, one of India’s largest private logistics company, is not particularly animated while talking about his achievements. To set up a business of this scale from scratch with a starting capital of about Rs25,000, 35 years ago, would have involved many hard-nosed decisions, negotiations and heartbreak, but he brushes them aside with a smile: “Of course, it was much more complicated than that."
Our meeting had moved at the last minute from a private members’ club in the Bandra-Kurla Complex, Mumbai, to the Allcargo office building in nearby Kalina. He was in the middle of some “homework and reading" for the World Economic Forum in Davos (held from 23-26 January; he was to attend a session on what the future office would look like).
I ask him for his opinion on the subject. “I am still reading on it," he says, smiling. But he knows that more people will work from home, lots of processes will be automated, there will be new ways of conducting business, and robotics will add value to them. Payment systems and consumer banking are likely to take a major hit, he believes.
We are on the seventh-floor terrace of the building—Allcargo started operating from this building about 15 years ago and now occupies all the floors. The terrace has a cafeteria for employees, but it’s evening and the place is relatively empty. A single table, among a host of others, has been set up for us—with flowers on it.
Shetty has a dinner to attend at his Bandra home after this meeting, but he is generously unhurried. He is used to working 10-12 hours and leaving after 9pm, which also helps him beat the traffic. In between sips of beer and the occasional dip into a bowl of nuts, he talks about his work.
His family, which owned rice and oil mills, was reasonably well off and Shetty, an “above average" student, lived an idyllic life in the small town of Bantwal, Mangaluru—not far from the coast. But he wanted to go to the big city, perhaps seeking a sense of independence.
In the late 1970s, he left his hometown after completing his commerce degree from Sri Venkataramana Swami (SVS) College, to work in a shipping firm in Mumbai.
After working for Intermodal Transport and Trading Systems Pvt. Ltd and then Forbes Gokak for four-five years, the famous Shetty entrepreneurial genes kicked in. The then 25-year-old decided to quit his job.
He felt he didn’t really have much further to go in these jobs because the top management was well settled and there were senior employees waiting in the wings. Even though it was a happy time—Shetty recollects spending evenings on the ship with the master, and enjoying the luxuries of imported Scotch and the occasional Marlboro. However, he could not work for someone else any longer.
He was in love with the shipping world and ready to strike out on his own.
He started his first company, TransIndia Freight Services, in 1983, to move cargo. Ten years down the line, with the ability to take some risks, Shetty founded Allcargo, a company engaged in providing integrated logistics solutions and services across multimodal transport operations, inland container depots, container freight station operations, contract logistics operations and project and engineering solutions.
“We started in 1993. In 2003, we were Rs1,000 crore (in revenue), which I never imagined," says Shetty.
The company went public in June 2006, and, sold less than 6% of its shares to private equity firm Blackstone Group Lp (last year, Blackstone sold its total stake, about 15%). The money helped them complete the acquisition of Belgian company ECU-Line NV and buy land to build container freight stations (CFS) in Chennai, Mundra, Bengaluru, Hyderabad and, more recently, Kolkata.
One of the biggest challenges, Shetty says, was the acquisition of the Belgian company in 2005-06. He was already working with ECU but he also started acquiring the company, with five times greater revenue than his own, piecemeal.
There were many sleepless nights, when he was trying to turn ECU into a profitable venture. The company’s entry into the international market and its global expansion, came with its own challenges.
“It (ECU) wasn’t doing well when it was acquired, probably a million euros. This year, it will earn €27million (Rs213 crore). That’s the turnaround," he says proudly.
Some more acquisitions followed, some loss-making companies were shut down, leading to a reduction in the number of employees. They bought three companies in India: Hindustan Cargo Ltd, MHTC Logistics Pvt. Ltd and CCI Integrated Logistics Pvt. Ltd.
Today, Allcargo has a market capitalization of Rs4,766 crore.
“Our employees are close to 8,500. 2,000-2,500 are contract labourers. Our international employee strength is 4,500 in 90 countries. Plus, we have agents," Shetty says.
“Cheers," he adds, raising a glass.
Shashikiran Shetty was in the news some years ago for buying the late actor Rajesh Khanna’s house, Aashirwad, on Carter Road, Bandra. “He was my idol in my formative years but it has nothing to do with buying the property. We were looking for a home and my wife didn’t want to move from Bandra. That got me a lot of news, more than I got for building this business, he says, laughing. The house, with a garden and swimming pool, will be ready by the end of the year.-
We reminisce a bit about the 1980s, a time when Hindi movies showed nefarious activities on the docks, when the underworld influenced transport and trade unions fought for workers’ rights. Shetty says their issues with unions were minimal—they were a small company at the time.
Initially, he just wanted something more than a job. For, in pre-liberalized India, in a capital-intensive and fragmented industry with big entities that had assets worth crores of rupees, “it was difficult to build an ambition", says Shetty. “There was no bank finance, forget equity."
So he based his business on three principles.
“In the logistics industry," says Shetty, “people never gave the right information. There was over-promise and under-delivery. I always had that thought: Stand up and tell your customer the truth. The customer understands that problems are inevitable, such is the business."
“Two, we will do business with people who pay on time and allow us to make money."
“Three, build an organization with the right people, control finances, pay on time, and do all compliances. Have a nice office and people will come into a professional set-up. Look at this building: A logistics company does not need a building like this," he says.
His family helped. His brother Umesh joined him, as did his brother-in-law, joint managing director Adarsh Hegde. Currently, his 23-year-old son Vaishnav is learning the ropes, offering insights on where they can improve.
Shetty stresses the importance of spirituality in his life. “It brings foresight and the ability to not get too affected by what goes on around you. It brings clarity to thoughts, gives you wisdom to do the right thing in life, and, when you do the right things, you are happy most of the time," he says.
It also helps him remain healthy—“I don’t feel less energetic than a young man. I don’t get carried away easily and I don’t carry any baggage," says the avid golfer, whose vacations around the world with wife Arathi revolve around golf courses and spas.
He has just returned from the 50th anniversary celebration of his alma mater, SVS. Arathi has returned after celebrating the birthday of daughter Shloka, who is braving her first winter in Chicago, US, as a freshman in Northwestern University, studying economics and mathematics.
As we part, it’s past 9pm. The office building is empty, barring a few security guards. Shetty hurries back into his office on the sixth floor. Allcargo is already investing heavily in warehouses, storage facilities and acquisitions. There’s much work to be done if he has to achieve his objective of turning Allcargo into a $2 billion company by 2020.