Allcargo Logistics Ltd is looking to sell 25-40% stake in its subsidiary Allcargo Gati Ltd which it acquired nearly five years ago, two people aware of the development said. The company has hired investment bank Avendus to scout for investors and is looking at a valuation of $300 million for the subsidiary, the people said.
Allcargo, which acquired the then Gati Ltd in April 2020, restructured the business and raised its shareholding over a year ago, one of the two people said. “The firm is now looking to unlock value in Gati,” the person said, adding the transaction is in initial stages, and will help the company expand and invest in technology.
Allcargo’s stake in Gati rose marginally from 46.86% at the time of the acquisition to 47.30% at the end of FY23. Shares of Allcargo Gati closed 1.96% lower at ₹85.99 a share on NSE Wednesday, with a market capitalization of ₹1,264.58 crore.
“The firm will look at selling around 25% stake in Gati. This could be mix of primary and secondary stake sale. Depending on the buyer interest, the stake can go up to 40% too,” the second person said, adding the company will approach mid-size private equity and sovereign wealth funds.
Earlier, Allcargo had sold a majority stake in its warehousing business to global private equity investor Blackstone for ₹380 crore, which was used to develop logistics parks in key consumption hubs.
Founded by Shashi Kiran Shetty in 1993, Allcargo provides services such as multimodal transport operations, container freight station operations, contract logistics and logistics parks.
Queries emailed to a spokesperson of the Allcargo group remained unanswered.
Founded in 1989, Allcargo Gati provides connectivity across air, road, ocean and rail. It is present in over 650 districts covering around 19,000 pin codes. It is engaged in express distribution, supply chain management solution, e-commerce logistics, managed value-added transportation services, freight forwarding and cold chain logistics, a January 2024 note from Care Ratings said. The company caters to clients across varied industrial segments such as general manufacturing products, computers & peripherals, auto components and pharmaceuticals. Some of its top clients include TVS Motor Co. Ltd, 3M India Ltd, Samsung India Electronics Pvt. Ltd, Maruti Suzuki India Ltd, Honda Motors and Schaeffler India Ltd.
Allcargo Gati has also done away with some of its non-core businesses to focus on growth and profitability. It exited many non-core and non-performing businesses to focus better on its express logistic business in the last two years, the Care Ratings note said. It has sold off its loss-making overseas entity Gati Asia Pacific Pte Ltd.
In May 2021, it also exited the cold chain solution business—GK Cold Chain Solutions Pvt. Ltd, (previously, Gati Kausar India Ltd). Allcargo Gati has scaled down the business of Gati Import Export Trading Ltd and is in the process of exiting its fuel station business. “The steps taken by the company to exit from non-core operations augurs well for the overall growth of the company,” Care Rating observed.
“It is now best suited to attract PE investors for its next level of growth,” the first person cited above said.
Allcargo Gati’s revenue for Q2 FY25 stood at ₹374 crore, registering a 4% quarter-over-quarter growth over Q1 FY 25. Its earnings before interest, tax, depreciation and amortization or Ebitda for Q2 FY25 at ₹19 crore, improved by 20% year-over-year, highlighting success in cost control and efficiency.
Interest in India’s logistics segment has been growing. With the explosion in consumption in India’s tier I and tier II cities, the need for end-to-end logistics services providers has increased. Companies in the industrial and logistics segment attracted more than 67% of the PE investments in the first half of the current financial year up to 30 September, 2024, data from Anarock India shows. The Indian logistics market, valued at ₹9 trillion in FY23, is likely to grow to ₹13.4 trillion by FY28, with a compounded annual growth rate (CAGR) of around 8-9%, as per a report by Motilal Oswal.
