Allcargo Logistics, an integrated logistics company present across multiple B2B (business-to-business) ventures, announced its foray into the B2C (business-to-consumer) vertical by acquiring a controlling stake in express logistics firm Gati.
Mumbai-based Allcargo announced that it was acquiring a majority stake of about 44.64% in the listed company for a consideration of ₹416 crore. In line with securities markets regulations, Allcargo, founded by first-generation entrepreneur Shashi Kiran Shetty, will be funding the acquisition through a mix of internal accruals and debt. The equity that Allcargo will bring to the transaction will be funded through the monetisation of non-core assets, including land.
“Allcargo’s market leadership in the global LCL (less than container load cargo) consolidation business and Gati’s domestic express transportation segment allows the company to offer end-to-end transportation capabilities to customers,” the company said in a statement issued after market hours on Thursday. “With the formal completion of this deal in the next two to three months, Allcargo will emerge as India’s largest logistics company by revenue in the private sector with an operational presence across the length and breadth of India.”
The express logistics industry is expected to reach ₹48,000 crore ($7 billion) by 2023, according to a study led by Deloitte in 2018. This growth will primarily be driven by domestic consumption, shift from unorganised to organised trade, e-commerce (domestic and cross border), and significant demand from the small and medium B2B segment.
“The exponential rise in cross-border and domestic e-commerce has opened up new markets for traditional express players such as Gati. With Allcargo’s existing strength in the ocean transportation business and Gati’s expertise in land and air transportation, we are now in a unique position to offer our customers a suite of truly multimodal solutions,” said Allcargo chairman Shetty.
For the year ended March 31, 2019, Allcargo reported a revenue of ₹6,900 crore and a net profit of ₹243 crore. For the same financial year, Gati reported net sales of ₹1,863 crore and net profit of ₹230 crore. Allcargo’s share price closed at ₹94.15 per share on the BSE on Thursday, down 0.21%. The bourse’s benchmark index, S&P BSE Sensex ended at 40,779.59 points on the same day, down 0.17%. Gati’s share price gained 1.15% to end at ₹66 per share.