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The Mumbai-based company also aims to raise up to Rs 300 crore in equity funds for Gati, its express logistics business, a person in the know separately said on condition of anonymity.
“During the supply chain disruption, people order a lot of material. All the warehouses were full and there was no space. People over-ordered thinking this would continue,” Shetty said. “But with the sudden war in Russia and Ukraine, the world has changed dramatically. Commodity prices and interest costs went up. The governments stopped doling out money in the Western world.”
Global freight and shipping rates, which surged to record highs in 2021 and 2022, have now fallen back to pre-Covid-19 levels as inflation pressures squeeze consumption across the world and there is an oversupply of container vessels in the seas.
Allcargo Logistics’ consolidated revenue – the largest chunk being its international supply chain operations – slid 35% year-on-year in July-September 2023, while EBITDA fell 68%.
Shetty said the cost cutting would include a rationalisation of the workforce and a freeze on hiring. “The staff count and costs have gone down substantially” he said.
However, things are looking up, he said.
“The signals indicate that December onwards will be definitely better. Inventory levels are now down and real orders are taking place, plus Chinese new year is coming up,” Shetty said, adding the numbers will start “looking up” after April.
Allcargo Logistics is investing heavily in digitalisation, data security and centralisation of all its processes, including its financial systems, he said.
The push followed a cyber attack in 2021 which crippled the company’s systems for a week. “Today we are one of the most secure logistics companies in the world,” Shetty said. Allcargo Logistics has engaged firms such as Ingroup, KPMG and EY.
“By the end of 2024, we will have a global system, one operating system, one platform to transact our businesses,” said Shetty.
Earlier this month, Allcargo Logistics said it will demerge its money spinning international business ECU Worldwide into a separate listed entity, Allcargo ECU Ltd, as the last step to restructuring its businesses. The restructuring started with selling the company’s non-core assets, progressed to giving exits to its partners and acquiring their stakes in business, and has culminated with this demerger.
The Allcargo Group will now have four listed entities, including Allcargo ECU and Allcargo Logistics (which will include the express business after it acquired Gati). The other two entities will be Allcargo Terminals and TransIndia Real Estate, in each of which its promoters own 70%.
Shetty said Gati, which is still a loss-making and leveraged entity, will raise equity funds “to create a five-year business plan, put in place systems, processes, invest in people, buy shares in Allcargo and retire debt”.
TransIndia Real Estate may take the alternative investment fund route to raise money, he said without elaborating.
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