Acquisition marks Allcargo’s entry into B2C logistics
Allcargo Logistics Ltd., India’s largest integrated logistics solutions provider has forayed into the express logistics space by acquiring a controlling stake in Gati Ltd. – a pioneer in the segment.
Through this transaction Allcargo has added another domestic service to its portfolio by entering a segment which has been growing exponentially. Allcargo has become the only Indian company to provide a comprehensive range of services Multimodal Transport Operations (MTO), Container Freight Station Operations/Inland Container Depot Operations (CFS-ICD), Projects & Engineering Solutions, Warehousing, Distribution, Contract logistics and Logistics parks. Allcargo’s market leadership in the global LCL consolidation business and Gati’s domestic express transportation segment allows the company to offer end-to-end transportation capabilities to customers. 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 INR 48,000 crore (USD 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,” stated Mr. Shashi Kiran Shetty, Chairman, Allcargo Logistics Ltd.
Gati has simplified door-to-door express logistics over the last 25 years. The company has a wide-ranging customer base that comprises of the top Indian industry leaders, e-commerce players as well as SMEs. Post this deal, Gati will be in a position to leverage Allcargo’s global network to provide time and cost efficient solutions to clients.
“With this strategic deal with Allcargo Logistics, we have entered a new era of consolidation in the domestic express logistics space. This collaboration also reiterates our commitment to ensure maximum outreach across untapped markets and provide benchmarked last-mile delivery solutions to our clients,” stated Mr. Bala Aghoramurthy, Deputy Managing Director, Gati Ltd.
Gati is a household name in India with presence in 727 districts and an extensive service network reaching out to 19,000 PIN codes across the country. Allcargo is India’s largest integrated logistics services provider with a presence across crucial touchpoints on the land side as well as ocean side of the value chain.
With this acquisition, Allcargo is also entering into a strategic relationship with Kintetsu World Express (KWE), the 10th largest air freightt forwarder in the world which has been in the news for acquiring world-renowned APL Logistics. KWE has a market cap of over USD 5 billion and is also one of the key customers of ECU Worldwide (Allcargo’s wholly-owned subsidiary) in its LCL business. This partnership will allow Allcargo and KWE to jointly explore and pursue further collaborations within and outside India.
Gati operates an asset-light model with a distribution network of trucking companies that provide vehicles on need basis. The business operates on a hub and spoke model across the country with highest standard of safety and compliance. Shipments are tracked on a minute-to-minute basis with a state-of-the-art ERP and tracking system. This business got itself further organised after the roll-out of GST in 2016, which immensely benefited the transportation sector. These operations strengthen Allcargo’s reach within India and supplement the company’s warehousing and contract logistics services.
Allcargo has a proven track record of successful transformation and integration of past acquisitions/mergers. With this acquisition, the company is looking to leverage its experience to bolster Gati’s hitherto successful track record as a major player and provide a wider portfolio of multiple services to existing customers in India as well as around the globe. The outcome of this strategic decision will also give the group’s combined workforce of close to 10,000 employees further opportunities to grow within the group.
Ever since listing on the bourses, Gati’s stock has been traded in large volumes due to huge retail interest. From a high of 148.50 in 2017 and 154.45 in 2018, Gati’s shares reached a high of 94.85 in 2019, indicating a huge opportunity for upside from the levels we are entering (which is 75).
This important deal was done to align the group to the growing Indian transportation and logistics market which is expected to further consolidate owing to the digital push and continued reforms pursued by the Indian government. This will help Allcargo achieve sustained growth as a leader in the logistics industry and continually grow in the short, medium and long run.
