Allcargo Logistics reviews crane business as it looks to go asset-light

Leading integrated logistics services provider Allcargo Logistics, which is expecting volumes to normalise by August after being disrupted by COVID-19, is also continuing on its plan to become asset-light.

After selling is logistics park assets to private equity major Blackstone, the company is now evaluating its crane business. “We have sold some of the cranes. We won’t further invest in the business, and are reviewing the portfolio,” Deepal Shah, Chief Financial Officer told.

Shah said utilisation of the cranes had dropped from 85 percent to 15 percent after a nationwide lockdown was imposed to limit the spread of COVID-19. “The utilisation has improved to up to 65 percent as economic activity has picked up in green zones,” Shah said.

The crane vertical, which caters to all kinds of construction activities, had revenues of about Rs 200 crore in the 2020 financial year.

The review of the business is part of Allcargo Logistics’ overall roadmap to becoming lighter and debt-free. In January, the company had signed an agreement with Blackstone to divest 90 percent of its equity in the warehousing vertical for about Rs 1,400 crore.

PTI reported in June that the PE major has already invested Rs 380 crore as part of the deal, which will be a mix of debt and equity. Chairman Shashi Kiran Shetty had said the deal will be completed soon.

The deal will help Allcargo, which had invested Rs 1,000 crore in a third-party logistics business, to clear its consolidated debt. The company had debts of Rs 1,000 crore in June.

The deal helped the company shore up its reserves even as it completes the buyout of Gati. The deal will help Allcargo get into the express parcel service. In March, it had got the clearance from market regulator SEBI for the deal, which will see Allcargo spend a little over Rs 400 crore for a 46.83 percent stake.

“We will retain very little debt, which will be used for working capital requirement,” Shah said.

COVID-19 impact

Allcargo claims to be the world’s largest when it comes to ‘LCL consolidation.’ LCL stands for less than container load, and as again Full Container Loads is a shipment that only takes a part of an entire container. Allcargo provides export and import services for those looking to transport cargo.

Explaining the business nature, Shah said any import order takes a ‘lag’ of a month-and-a-half or takes that much time to be completed. The orders travel through high seas before reaching ports in India.

This is the reason why the segment didn’t immediately feel the impact of the COVID-19 disruption. “It was near normal until the middle of June. At present, the volumes are down about 20 percent, but should get back to near normal in August,” Shah said.

Much of Allcargo’s business, he added, has been functional through the lockdown.