Allcargo Logistics board approves demerger of CFS/ICD & Real Estate businesses

The Board of Directors of Allcargo Logistics Ltd on Thursday approved the demerger of CFS/ICD and real estate businesses intending to create strategic business undertakings to drive growth across distinct opportunities.

Under the proposed scheme of demerger, the CFS/ICD business will go into Allcargo Terminals Limited and the equipment rental, logistics parks and other real estate assets into TransIndia Realty & Logistics Parks Limited (TransIndia).

Under the scheme of demerger, all three companies will have mirror shareholding, resulting in no change in the entitlement of shareholders for each entity. After the demerger, shareholders will get 1 share each of Allcargo Terminals and TransIndia Realty & Logistics Parks for every 1 share held of Allcargo Logistics. The 1:1 ratio will avoid fractional allotment and benefit all shareholders.

Commenting on the decision, Shashi Kiran Shetty, Chairman, Allcargo Logistics, ECU Worldwide and Gati Ltd. said, "The company takes pride in its heritage and leadership, which have led to sustained growth in the long term. Now, we have business units, which have achieved the right scale and seek independence to drive the next phase of growth. The scheme will facilitate strategic growth in demerged businesses and make the company stronger."

"This is a historic day for the company. We have grown at 15-20% CAGR on both revenue and EBITDA over the last 15 years and this demerger will set the foundation for the next phase of growth by providing independence to businesses", he further added.

The company says that the proposed demerger scheme, where CFS/ICD business will go into Allcargo Terminals is a strategic move as it will position the company to accelerate growth across businesses by creating independent business undertakings, with sharper management focus, better access to the right capital, and greater operational and financial flexibility.

Allcargo Logistics Limited would continue to be the leader in the international supply chain, express logistics and contract logistics businesses with an increased focus on digitization. The resulting company Allcargo Terminals will be the market leader in the CFS business in India and continue to expand its footprint in ICDs. Five out of seven facilities of Allcargo are already on lease and the new resulting structure will make all seven CFS/ICDs completely asset-light, positioning the company strongly to drive growth with a high return on capital employed.

Under the proposed scheme of demerger, where equipment rental and real estate businesses will move to TransIndia, will help in creating a unique portfolio of best in class grade A warehouses and other assets leased to marquee clients. The business will also hold the shares in the JV with Blackstone. Post demerger, the business would have the opportunity to attract the right pools of capital, as a grade, A warehousing is in very strong demand and the capabilities of TransIndia will provide opportunities for robust growth.