M&A Critique

ALLCARGO dumping assets heavy business into a separate company to invite financial investor

Starting as a Multimodal Transport Operator Company, Allcargo Logistics Limited diversified across various other ancillary businesses. Last year, with the acquisition of Gati Limited, Allcargo Logistics Limited’s vision to become an integrated logistics company seems to be fulfilled but ushered in the consolidation of various businesses having different risks and returns. To accelerate growth and to improve return on capital employed, Allcargo Logistics Limited has decided to split its logistic business into three verticals.

Allcargo Logistics Limited (“ALL”) part of The Avvashya Group is a global leader in multimodal logistics solutions. Allcargo Belgium NV., Operating ECU Worldwide network, is a global market leader in ocean freight consolidation. ALL along with its subsidiary companies is engaged in the business of:

  • Multimodal Transport Operations
  • Container Freight Stations/Inland Container Depots
  • Project and Engineering Solutions
  • Logistics Park
  • Express Logistics business
  • Contract Logistics

Allcargo Terminals Private Limited (“ATPL”) is incorporated in 2019 and has not engaged in any business operations. ATPL is a wholly-owned subsidiary of ALL.

TransIndia Realty & Logistic Parks Limited (TRLPL) is a wholly-owned subsidiary of ALL and has been incorporated to facilitate demerger transactions.

The Proposed Transaction

The Board of Directors of Allcargo Logistics Ltd approved the demerger of Container Freight Stations/Inland Container Depots business into Allcargo Terminals Limited and demerger of equipment rental, logistics parks and other real estate assets into TransIndia Realty & Logistics Parks Limited (TransIndia).

Container Freight Stations/Inland Container Depots business include operations related to CFS and ICD businesses across locations at JNPT, Mundra, Chennai and Kolkata. JV with CONCOR and planned ICD at Jhajjar under Allcargo Inland Terminal would also be a part of ATL. The land bank pertaining to usage for this business would be transferred to TRLPL and ATL would continue to be managed as an asset-light entity.

"The move to transfer land pertaining to CFS business to rent yielding company aligned towards making CFS business asset-light and at a same time bringing more assets in rent yielding company"

Equipment rental, logistics parks and other real estate assets business include a portfolio of high yielding rental assets. Some entity assets which will get transferred as a result of demerger which are required for running related-party businesses will be leased back to the group (land bank at JNPT and Chennai, corporate office, etc.). Also, certain asset classes which could be leased/constructed with other JV partners (Logistics Parks, etc.) would also be a part of TRL.

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Aniruddha Jain