Home / Companies / News /  Demerger to allow entities to chart independent growth path: Allcargo
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MUMBAI : The demerger of two businesses of Allcargo Logistics Ltd into separate listed entities will enable the logistics-focused group to pursue an asset-light model for its core business, while allowing the demerged entities to chart independent growth strategies, vice-chairman V.S. Parthasarathy said.

Allcargo is in the process of setting up two separate companies for its warehousing-focused real estate unit and container freight station business. The demerger under a National Company Law Tribunal (NCLT) process is likely to be completed by early next year. Post-demerger, Allcargo will be split into three listed entities.

“Sometime back, we took a view to adopt an asset-light model. This led us to sell some equipment like cranes etc. which we were not utilizing well. Now, as we progress, we see four kinds of businesses emerging. One is our MTO (multimodal transport business) biz, which is LCL (less than container load) and FCL (full container load) business. Then, there is a real estate business, where you have space that you can develop and rent out. But of course, real estate is an asset-heavy business, so you can’t say you will be asset-light and still invest in realty. Third is CFS (container freight station) and fourth is express business, which is currently housed in Gati," said Parthasarathy.

The MTO business is the mainstay of the group, while the other verticals contribute 15% of its businesses. “If I want the remaining 15% business to grow faster, I need to give them the freedom to grow. They seek different kinds of customers, maybe different kinds of investors and also need not be bound by our philosophy of being asset light. The demerger makes the two parts come through."

This restructuring will help make the organization more structured and decluttered, and make it more attractive for investors who would rather invest in these individual businesses than invest in a business conglomerate, Parthasarathy said.

“So real estate-focused investors such as pension funds can come into the real estate side. Our real estate is ready to fly and CFS is ready to fly and therefore we need to give them wings. This will be a direct listing. One listed company will break into three, the shareholders of three firms will be the same. As we put this out, right kind of signals are being sent out and we are just starting to meet (investors). We have time till January, depending on the NCLT process," he added.

Allcargo is the largest private firm in the CFS space after state-owned Concor. For real estate, it has a land bank of close to 300 acres and is developing Grade A warehousing space for e-commerce, chemicals, auto and FMCG companies.

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