 "Allcargo Logistics to invest $500 mn in next 3-5 years")
With the intention of touching a $2-billion revenue target by 2020, Avvashya Group company Allcargo Logistics will be investing $500 million in the next three-five years towards organic as well as inorganic growth of its business.
"To become a $2 billion company we cannot do without acquisitions. So in the next three-five years, we plan to invest $300 million in the global business and balance will be for India business," chairman and founder, Shashi Kiran Shetty told Business Standard.
Currently, the Mumbai-based company garners revenues worth a billion dollar through its multimodal transport operations, project and engineering solutions and container freight station operations present across India and in over 89 countries.
"In the domestic market, we plan to focus on growing the container freight station business by opening new cargo centres particularly in the northern region of the country, where we do not have major presence at the moment," informed Shetty. The company also plans to set up logistic parks in the region where other companies can build and run their own facilities on the land provided by Allcargo.
"We are also looking to develop large logistic parks near Ennore and Katapalli as we have valuable land there," he added.
In the year ended March, Allcargo's profit before tax, interest and exceptional items in its container freight station operations segment has seen only a three percent year-on-year rise to Rs 17.16 crore on a standalone basis.
Meanwhile, for its project and equipment segment, the company aims to maintain its asset utilisations at 90 percent and will primarily focus on keeping the segment asset light by sourcing equipments from third party within and outside the country.
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"There is a lot of potential in this segment, which remains untapped. For this segment, our strategy is mainly to get equipments on contract and supply them rather than invest in any assets," said Shetty.
Currently, all the wind mill companies in the country are clients of Allcargo, sourcing equipments from the latter. Going ahead, the company will also be providing equipments, especially cranes to ports where expansion is ongoing.
"For this year, we see a 15-17 percent growth in the project and equipment segment," said Shetty.
In the year gone by, the segment showed profit of Rs 74.53 crore before tax, interest and exceptional item, up good 85 percent from same period last year.
Regarding Allcargo's inorganic growth strategy, the management said the multimodal transport sector overall is growing at a fast pace and has several players that are struggling because of their sheer size.
"This is an opportunity to get hold of some of the struggling companies in this segment that we see value in acquiring this business," said Shetty.
The company has chosen mainly the inorganic route to grow its business as it has made 10 acquisitions in the last decade with two latest being in 2013, one in the US and other in Netherlands. "We have been quite happy in investing in such acquisitions as we have got what is needed," Shetty added.
Of the total revenue of Allcargo, which is close to a billion dollars, about 80% comes from its global operations with multimodal transport segment being the highest contributor followed by project and engineering solutions (in revenue terms).
For its overall acquisitions, Allcargo plans to raise funds partly through internal accruals and also via debt in the overseas market. As on March 31, the company's consolidated debt stood at 600 crore with cash and cash equivalent at Rs 400 crore.
"Our net worth is about Rs 2,300 crore as on March 31 and so with a debt of just about Rs 600 crore, we have enough room to take additional debt on to our books going ahead," said Shetty.